Preregistration for this invitation-only event, which will be held at the Milken Institute, is required. For information, contact the Events Department at 310-570-4605.

Preregistration for this invitation-only event, which will be held at the Milken Institute, is required. For information, contact the Events Department at 310-570-4605.

Preregistration for this invitation-only event, which will be held at the Milken Institute, is required. For information, contact the Events Department at 310-570-4605.

Preregistration for this invitation-only event, which will be held at the Milken Institute, is required. For information, contact the Events Department at 310-570-4605.

Preregistration for this invitation-only event, which will be held at the Milken Institute, is required. For information, contact the Events Department at 310-570-4605.

Preregistration for this session is required. Please send your requests to Joe Meehan at jmeehan@milkeninstitute.org.

Robert Butler said he deplored the lack of training in aging that doctors receive. In Great Britain, he said, gerontology is the second- or third- largest specialty, but in the United States, only 10 percent of medical schools require gerontology courses or rotations at nursing homes. He recommended the creation of a blue-ribbon commission on health care for aging, as well as increased funding for aging research, to perhaps 1 percent of the Medicare budget.

Research has shown that older people respond differently to treatment, but this knowledge has often not been put into practice, noted Samuel Klein. He said that even obesity, which is found in all age groups, should be treated differently in the old.

Sandra Gadson said that older people would be better served if more of them were involved in clinical trials.

Butler explained that the elderly, who often suffer from several diseases or chronic illnesses, use 40 percent of all prescription medications. Yet no requirements exist for their inclusion in clinical trials; in fact, most trials involve 35- to 45-year-olds suffering from a single illness. This problem is exacerbated because in general clinical trials use 3,000 subjects; yet about 30,000 subjects are required to determine liver toxicity.

Prevention of the chronic diseases that require these drugs was also a strong theme. Butler explained that many classic diseases of old age really start in childhood. Osteoporosis, for example, is caused by inadequate calcium intake throughout life. And Perry noted that "aging is a lifelong process." Lewis Kuller stressed the failure of the medical profession to apply the knowledge of prevention. Given that the majority of men 65 and older have some form of vascular disease, he recommended that they all receive treatment for it as a matter of course.

Prevention of obesity, in particular, was a concern among the speakers. Butler emphasized the importance of physical education in schools, drawing a parallel between the 8 percent of children on Ritalin and the possible lack of outlet for their energy. Klein countered that obese baby boomers had physical education in school, and that it′s not a lack of knowledge that makes people obese, but rather an environment that makes it difficult for most people to follow low-fat diets. Kuller agreed; most of our earlier advances in mortality and morbidity came from environmental changes that made healthy living easier. For instance, people no longer have to boil water to avoid dysentery, he said. Gadsen offered the example of poor neighborhoods that tend to have plentiful fast-food restaurants and few grocery stores -- making healthy eating difficult.

Although David Lipschitz agreed with the other speakers on the importance of medical education and prevention, he rejected the general pessimism that accompanies aging. His own life has only improved with age, he said, and he insisted that "the best is yet to come." He offered three keys to a long and healthy life: love, faith and purpose. Given the example of first-generation Latinos, who despite their disproportionate poverty tend to be healthier than native-born Americans, most of the speakers blamed American diet and a "fitness-negative culture." However, Lipschitz pointed to Latin culture, which is family-centered and often quite religious as a cause of health.

All the speakers agreed that the medical profession must adapt to a "graying" America. However, most of them spoke more strongly on how the culture as a whole must shift to make people healthier longer. Recalling a discussion he′d had the day before, Perry explained that physical activity and good nutrition are key to a long life. The challenge is to enable these behaviors.

The challenge of providing quality health care to everyone at a reasonable cost in the face of these trends was the focus of discussion by a diverse panel representing the perspectives of patient advocates, medical providers, pharmaceutical and biotechnological industry sectors, and the federal government.

Joe Hogan of Healthcare noted that the balancing act of optimizing quality, access and cost is the main challenge in making health-care policy decisions. Universal health-care systems may optimize access, but they do not necessarily guarantee quality. In contrast, private U.S. health-care systems that aim to optimize quality do not necessarily correlate with better quality. The panelists suggested several ways to improve the current state of affairs, as well as how various groups can work together to bring about change.

Decreasing the cost of health care was at the forefront of the discussion. Hogan suggested that since illness management accounts for a high cost of medical expenditures, early detection and treatment could help reduce the health-care costs dramatically. New medical imaging technologies have the potential to provide early diagnosis, he added, but they need to be provided at reasonable costs to primary-care physicians in order to make an impact.

James Greenwood of BIO added that introducing financial incentives to get checkups is one way to ensure that primary-care physicians can monitor patients on a regular basis. The AMA's Ed Hill remarked that several preventable behaviors, such as drug and alcohol abuse and improper weight management, result in a trillion dollars of medical costs. He suggested that a new look at health-focused K-12 education could create an effective way to educate the young people about the consequences of their choices.

The speakers agreed that the quality of health care could be improved dramatically with the concept of "personalized care." Myrl Weinberg of the National Health Council said that personal health records are a critical component in empowering patients to take responsibility for their health-care decisions. Many patients already use Internet sites to educate themselves about health-care options and provider options. Personalized health records could drive greater patient involvement in decision-making about their treatments.

Weinberg noted that personal health records could be implemented in the next two to three years, given collaboration between key players. Hill and Hogan were more hesitant, pointing out that only 23 percent of physicians are currently using digital records and that the adoption of these technologies tends to be challenging and slow in such workflow-centric environments. In addition, Hogan noted, it is not enough to focus on increasing lifespan as a measure of health-care quality. Instead, he said, we need to focus on increasing the "health span," the length of people′s healthy and productive lives.

Various philosophies about how to improve access to health care compete in the political area, which is part of the reason why change is difficult, even though many agree that the status quo is inadequate. In discussing the recent Massachusetts decision to legislate mandatory health insurance coverage on the state level, the panelists agreed that it is an interesting and brave experiment, and that more action on the legislative front in order to encourage better access to health care. However, Andrew von Eschenbach, the acting FDA commissioner, cautioned that simply having insurance does not guarantee adequate coverage. Personalized insurance plans are needed in order to improve access to specific treatments.

The panelists concluded was their representative groups need to continue working together. Fostering better communication and understanding of common objectives is critical to establishing lasting relationships needed to produce positive change.

Glenn Yago of the Milken Institute began the session with a synopsis of the economic effects of terrorism, which include depressed GDP growth, the destruction of physical and human capital, and decreases in bilateral trade. He noted that modern history has seen Israel endure approximately 10 percent of terrorist attacks, as well as 10 percent of worldwide terrorist casualties. Al-Qaeda leads terrorist organizations in the number of attributed fatalities and has gradually shifted its focus from political to civilian targets, which foreshadows a growth in terrorism′s global toll.

Sen. Hart backtracked, directing the discussion to the pre-9/11 era, when the Hart-Rudman Commission on National Security in the 21st Century was one of several bodies studying the domestic threat of international terrorism. He described his efforts to create a consolidated federal protective agency to internally defend domestic soil, similar to today's Department of Homeland Security. His juxtaposition of the pre- and post-9/11 American mindset with respect to terror tactics set the tone for the rest of the session.

UCLA Professor and Milken Institute Senior Fellow Michael Intriligator continued the discussion with an economic analysis of the elements of global terrorism. He suggested that the economic outcomes of terrorism were derived from supply-and-demand functions that would remain intact as a result of "substitution theory"; in other words, a clash between defensive action and a perceived demand for terror tactics would simply result in a change in the medium of attack. Innovation also plays a factor, as evidenced in the 9/11 attack, which combined two traditional tactics: suicide bombing and plane hijacking. Intriligator hammered his message home with a frightening fact: Los Angeles, especially the Los Angeles/Long Beach port complex, the biggest in the nation, is one of the country's prime targets.

Moving from economic theory to biomedical and technological application, UCLA Medical Professor Peter Katona explained how tactical convergence with integrated innovation in the form of a biological attack poses the greatest threat. Currently, the American health-care industry is not poised to act in the event of such an attack. Katona furthered his point by reminding the panel that more money is spent on biomedical lawsuits and tort litigations than the actual development of counteracting biological agents and vaccinations.

The discussion turned to practical economics when Irene Kyriakopoulos, a professor of economics at the National Defense University, ran some of the numbers included in the cost of terrorism. Currently, Homeland Security and relevant defense spending totals close to $400 billion; but hidden costs exist in health care and trade deficits.

Yago directed the panelists to the topic of solutions. All agreed that a better understanding of terrorists and terror tactics was needed; ideally, this would be followed by preemptive strikes on financial roots and command structure to prevent future attacks. As a last resort, domestic targets should be hardened to minimize costs and casualties.

Before the close of the discussion, Hart brought up the importance of America's dependence on foreign oil, arguably, the country′s Achilles' heel in the war on terror. He proposed that the country take action to wean itself off foreign oil with either alternative energy or a different supply. After fielding questions, the panelists agreed that the country's fundamental problem with respect to terrorism was the ability to respond, but not necessarily anticipate. Anticipation and understanding will be key elements in the future of the struggle against terrorism and its economic fallout.

If current trends in investment and productivity continue, and he believes they will, McCaughan expects bond yields to decrease to 2 percent or 3 percent within 10 years, as opposed to a rise to 10 percent or even 15 percent that has been predicted elsewhere.

Central to McCaughan's discussion and analysis was the role of demographics, specifically with regard to decreasing fertility rates and increasing life expectancy over the past 40 years. When Bismarck invented the pension plan in the 19th century, McCaughan said, it was a fairly low-value option, offering a pension at age 65, when the life expectancy was only 63. Today, by comparison, more elderly people are receiving pensions and living until 90. Along with this, he argued that inflation has been kept low in the developed nations by now-established households within the demographic structure outlined above.

Audience members questioned the role of liquidity, the validity of current account deficits and the implications of the very recent attack on the U.S. dollar. In each case, McCaughan was confident that nothing needed to, or would change. One listener was skeptical with regard to McCaughan's assertion that inflation is stabilized at around 2 percent to 3 percent, insisting that inflation is a real problem, its real source is government money creation and that "economists should probably be forced to take accounting 101." McCaughan acknowledged the tenacity of this argument but ultimately quipped that "try as we look, it's a bit like weapons of mass destruction: We can't find evidence of inflation."

The relationship change makes sense, according to Arthur Carty, the national science advisor to the Canadian prime minister, because it gives firms access to the best and the brightest people, opens a window to cutting-edge research and allows firms to cut back on their own R&D costs. However, Kevin Cullen of the University of Glasgow disagreed. While acknowledging that even Lord Byron, who wrote over a hundred years ago, knew that a university′s role was to create and disseminate information, the change today was in people's expectations from research institutions.

Regardless of their viewpoints, as the role of universities in R&D change, there is a need to bridge the cultural gap between academia, governments and private industry. Key roadblocks to the university-industry interactions are cultural and motivational differences.

Cullen believes there are two types of research. The first type is "outreach," where the universities disseminate research for the public good without any expectation for money back. The second is outcome-based research, which takes the research to the marketplace.

Cullin estimates that as little as 5 percent of university research has any value in the marketplace. Since the majority of university research is not viable for the private sector, universities use a different measure of success: the impact on society. This measure obviously conflicts with the way business measures its success. Therefore, John Fraser of the Association of University Technology Managers, noted that universities cannot be the key innovators in the economy, but rather key players.

Speaking for the business sector, Wayne Johnson of Hewlett-Packard Co. noted that most companies do not know how to approach the relationship. And universities are fearful that they will not retain the intellectual property rights for their ideas. Instead, he said, universities and firms must look to build a relationship of trust through information sharing.

Because negotiations for the sharing of information with U.S. universities have been time-consuming and often difficult, many firms are now looking to foreign universities, where negotiating is less cumbersome.

Fraser noted that his section of the university, the Offices Technical Transfer (OTT) division, is generally looked upon as the "bottleneck of the process" between researchers and business. There are problems in the system, he acknowledged, adding that a detailed assessment of the "knowledge chain management" would be helpful so that OTTs can become more efficient.

Lesa Mitchell of The Ewing Marion Kauffman Foundation noted that one way to assist in this process is for universities to encourage faculty entrepreneurship by hosting sessions between the business industry and the community, and perhaps evaluating professor′s success beyond the number his or her publications.

Carty noted that government can be a catalyst for the movement of research into the universities by creating an environment and incentive for the small business spin-offs around universities. In the end, all the panelist agreed that the structure of the relationship must be improved in order to improve the efficiency between government, business and universities.

"An integrated approach is essential to reaching individual (internal) customer markets," noted Pamela Hymel of Cisco Systems. Corporate culture, employee incentives/disincentives, trust between employees and employers, and innovative prevention-oriented tools are some of the essential elements of an integrated, multi-pronged system that can ensure employee health and maximize business productivity.

The overall picture of mounting health-care costs is well documented: For many companies, health-care costs are rising faster than corporate profits. Less widely discussed is the loss in productivity associated with health-care issues, which also hits companies' bottom lines. Moderator Ron Loeppke of Matria Healthcare explained for every dollar a company spends on an employee's medical and pharmaceutical costs, the company spends two to three dollars on health-related productivity costs. This loss of productivity is naturally more acute for employees with more than two risk factors, he said. Research shows the converse is also true: Decreasing risks employees′ factors results in increased productivity.

Panelists shared their experiences in reducing employee risk factors, improving employee health and decreasing employer costs across different industries. A focus on prevention and wellness is central to their companies' approaches, they said.

Steven Burd of Safeway cited a new consumer-driven health-care program that included full coverage for all preventative care, and which his company implemented with about half its 23,000 non-union employees. The results were remarkable: an 11 percent decrease in health-care costs and a decrease in employees' emergency room visits by a factor of 7. These accomplishments are particularly important to an industry with low profit margins (1.5 percent for Safeway), he said, so decreasing health-care costs can have a significant impact on the company's bottom line. He revealed three keys to Safeway's successful health-care program: (1) ensuring that employees had some "skin in the game," so that health care did not appear to be free to them; (2) employee incentives and disincentives that correspond to health behavior; and (3) transparency of cost and quality information.

Hymel echoed the importance of these features and added that Cisco Systems has been innovative in using information technology to mitigate its upward trend in health-care costs. Cisco's approach leverages both its technology expertise and its corporate culture and demographics, specifically, its IT-savvy, youthful (the average age is 39) employee base. The company uses animation and health-oriented video games to engage employees in improving their health.

Panelists agreed that companies must use their corporate culture to implement change. Creating an atmosphere of trust is essential: Employees must trust their employers with confidential data, and the work environment regarding health-care issues (particularly those such as obesity and disease) must be supportive rather than punitive. Ron Loeppke observed that "culture eats policy for lunch every day," and that companies must thus model and believe in the behavior they encourage their employees to demonstrate. As Caroline Kovac of IBM noted, "You have to do things to build trust, to build this kind of program. If you do this right, it's a win-win for everyone, shareholders, companies and employees."

"It is time to rethink the American educational system," said panelist Dennis Vicars of Human Services Management Corp. Vicars noted that the U.S. public school system has been largely unchanged over the past 40 years and is designed to prepare children to work in an agrarian or assembly-line economy. Such a system does not prepare students for the rapidly changing and highly competitive global work force. Instead, the panelists agreed that students must be creatively prepared to learn throughout their lives. We must, in the words of Ohio Superintendent of Public Instruction Susan Zelman, design a fluid "womb-to-tomb" public education system to drive economic growth in the 21st century.

An effective "womb-to-tomb" system must begin with strong early childhood education programs. Gov. Tom Vilsack of Iowa surprised many by saying that he considered pre-kindergarten education programs the most single most important item in the state budget. Eighty percent of a child′s long-term academic potential is predicted by educational attainment at age 6, and early childhood programs can have a dramatic impact on narrowing achievement gaps between socioeconomic groups. Vicars noted that early childhood programs include some of the most exciting and innovative curricula in the U.S. educational system, and he stressed the importance of preserving the uniqueness of these programs while expanding them to the masses.

In addition to early childhood programs, our educational system must also allow workers to acquire new skills through post-secondary opportunities available throughout their lives. Harriet Arnone of New York Institute of Technology and Susan Sclafani of the Chartwell Education Group noted that adult learners tend to be more focused than younger college students, and that the ability to cater to these learners and allow them to constantly adopt new skills will be the key to long-term economic growth and a strong middle class.

The panelists also explored other characteristics of a superior public education system for the 21st century. A better system would include both high-quality mass education and deep academic opportunities for the most talented students, said Sclafani. Vicars noted that a superior system would have roles for public and private entities, with government creating high standards and private entities providing choice and quality to enable a variety of pathways for different types of learners. Vilsack noted that the American business community needed to take responsibility for defining the expectations and goals of our public education system, while Zelman called for the engagement of businesses and higher education in the creation of new school models. Finally, Arnone stressed the importance of basic literacy skill development to long-term success in a wide range of disciplines.

The comments by listeners in the interactive portion of the panel highlighted the importance of better communicating the crises in American education. Many of the listeners expressed shock at America′s low educational productivity and questioned the data. After the panelists clarified and affirmed their statistics, it became clear that more public dialogue about the quality and performance of our schools needed to take place. National leaders and candidates for national office must do a better job, Gov. Vilsack said, of galvanizing public opinion and support for the many changes that must occur in the US educational system.

Preregistration for this invitation-only event is required. For information, contact the Events Department at 310-570-4605.

They acknowledged, for example, that climate change is a problem but expressed uncertainty over the exact nature of that problem and its solution. It was noted that worldwide temperature changes have actually not been that dramatic, and that larger changes have actually been recorded at different times in the past. What is unique to the current situation, however, is the sharp increase in the level of CO2 in the atmosphere. Reversing this increase, they agreed, is perhaps the primary challenge the world faces if it hopes to prevent irreversible and potentially hazardous climate change.

The Kyoto Agreement is ultimately flawed, said Gary Becker, because it does not reduce CO2 emissions from the United States, China, India or any other developing countries. As an alternative to attempting CO2 emission reductions, the panelists were enthusiastic about the prospects for technological breakthroughs that might provide a method for reducing CO2 from the atmosphere, where the emissions tend to remain for a long time before breaking down. There is currently a great deal of government and private-sector research in this area.

Becker also proposed increased nuclear energy use In order to avoid fossil-fuel emissions entirely, Becker was a strong proponent for increased nuclear energy use in the United States. Mr. Becker noted that nuclear is a relatively clean and inexpensive energy source, and that many nations are already relying on it to a much greater extent than is the US.

A second significant problem is soaring health-care costs. As a society′s population ages, those costs increase significantly. In fact, the average annual expenditure for U.S. citizens over age 85 is more than $20,000. Additionally, there are fewer active workers to support each retiree, which results in slower economic growth. As a consequence, health-care costs consume an increasingly large proportion of economic output; they currently constitute 16 percent of U.S. GDP and 10 percent of world GDP, and these percentages are forecast to grow rapidly in the future.

One source of hope is that while medicine has high fixed costs, its variable costs are not that great. Therefore, the economic solution to caring for an aging population may involve greater reliance on medication, as opposed to doctor visits or hospital stays.

Not only are global populations aging rapidly, they are also becoming increasingly obese. Since 1980, the percentage of young people in the United States considered obese has soared. In the United States, one panelist noted, many people eat while engaged in some other activity, while in a country like France, eating is considered a primary activity. Plus, in America, portions tend to be 35 percent larger than in France.

In a study discussed at length by the panelists, more than a hundred variables were considered as possible causes for increasing obesity of America′s children. When all other factors were accounted for, it was determined that the principal reason for the increase since 1980 is a seismic shift in leisure activities from sports and other athletic pursuits to video games or Internet chat rooms.

There are no simple solutions, the panel concluded. Instead, a complex mix of government policies, business initiatives and individual choices will be necessary if we are to meet the challenges of the 21st century.

Some psychological studies show that people tend to treat risk as "danger," which is different from the professional interpretation of risk as standard deviation of the return. People want to feel safe with their assets or equity investments. Daniel Kahneman of Princeton University stated that most people will forgo higher-return, higher-risk investment opportunities in favor of lower but safer returns. In that sense, psychological considerations should be incorporated into financial study. Gary Becker of the University of Chicago agreed that it is important to understand how individuals view the financial market, and its risks and returns.

Some people believe that hedge fund investing is a zero-sum game, which means those who do well do so at the expense of those who do poorly. But Myron Scholes of Oak Hill Platinum Partners disagreed. He thinks hedge fund investment is a positive-sum game, he said, because it does provide some services. And if combined with another investment strategy, it can create solid returns without incurring excessive risk.

Kevin Murphy, also of the University of Chicago, made two important points: 1) It is very hard to evaluate an asset manager′s performance, and 2) when we talk about loss, we must define the term. Is it loss in real terms, loss in nominal terms, loss relative to other investment strategies or loss relative to the investor′s expectation?

All the panelists agreed that it is not unreasonable for some hedge fund managers to receive handsome compensation, even though it is hard to tell whether they are really talented (when one handles funds worth billions of dollars and more, even a small out-performance means huge gains).

Overall, the panelists' views were optimistic about the future of the United States. Expanding markets and off-shoring options were presented as opportunities for America's growth rather than threats to American workers. As Terry Semel, chairman and CEO of Yahoo! Inc. noted, emerging global economies mean new markets for U.S.-based companies. The increased profits earned through global expansion create more resources for a company′s growth and lead to a stronger U.S. economy.

Deborah Wince-Smith, president of the Council on Competitiveness, called off-shoring "best-shoring," further promoting the idea that global expansion contributes to American economic growth. Diana Farrell, director of McKinsey Global Institute and McKinsey & Co., pointed out that nearly a third of U.S. trade deficits come from U.S. foreign affiliate companies. Furthermore, the majority of employers in targeted sectors, such as services-based industry, are comprised of small to medium enterprise. The threat of these companies transitioning to overseas employment is not high enough to warrant concern. Overall, Americans do not need to worry about losing their current employment to off-shoring.

However, Juan Enriquez, chairman and CEO of Biotechonomy LLC, reminded the audience of the tentativeness of America′s current position. The trend is for nations and economies to shift, expand and collapse over time. While the United States may seem to be continuing its role as a major player in the global economy, Enriquez asserted that its position is no more guaranteed than was Great Britain's in 1902. America must stay on top of current trends and educate its children to be competitive in the shifting economy.

There seemed to be consensus that the United States' current strength and future potential lie in idea-centered employment. Cost of labor and commodity as measures of economic potential were downplayed. Wince-Smith labeled the future economy a "conceptual economy," based on innovation and ingenuity. U.S. employment is heading toward more thought-type work and away from manufacturing. Insight and ingenuity seem to be America's strength. Semel pointed out that the majority of highly complicated Yahoo! R&D is performed by American employees. Therefore, it seems likely that America will need to encourage forward thinking in its future workers to maintain global competitiveness.

Panelists listed education as the primary tool for fostering such forward thinking. Enriquez reminded the audience of the emerging biotechnology field. He sees enormous opportunities for growth and knowledge expansion in the future. He expressed concern that America is not doing enough to prepare its children for these opportunities. He called for vast improvements in the American educational system to prepare students to be competitive in the future global economy.

Panelists regarded science and technology as essential fields, but also emphasized arts and culture. In fact, combining skills from multiple areas was seen as the greatest potential for future innovation. Science and art can build on each other. As Terry Semel put it, students must learn to "think out of the box," and the mixture of multiple areas can encourage this.

While the global economy was not seen as a threat to America, panelists felt that the innovative, scientific, and technology-producing quality of American workers must be enhanced for future success. If the United States takes advantage of employee ingenuity, the expanding global economy may actually presents new opportunities for economic growth. Americans should not worry about job loss due to off-shoring, but should focus on becoming more competitive in an idea-centered economy.

The most obvious lesson to be drawn is the need to "take the disease seriously," argued John Barry, author of The Great Influenza and Rising Tide. The next most important lesson is to "tell the truth," he said. Public officials should not tell people they are facing ordinary influenza when it may debilitate 30 percent of the work force. This means owning up to the possibility that a modern flu pandemic could be worse than the flu pandemic of 1918, which occurred in a world with 30 percent of today's population and in a world without air travel.

Although the disease could spread faster in today′s world of rapid global travel, Barry explained that a flu pandemic would likely come in waves rather than all at once. Because of this wave phenomenon, Barry proposed trying to monitor the disease. With early detection, it might be possible to snub out the disease before it turns into a pandemic.

But if the flu truly becomes a pandemic, the economic costs may be tremendous. Sherry Cooper of Global Economic Strategist at Harris Bank had estimated the economic cost and predicted that global economic growth would be cut by 2 percent annually for approximately three years if the next pandemic were similar in scale of the 1918 flu pandemic. Because companies keep razor-thin inventory and labor margins, a shock to the economic system might be enough to break it. Most businesses would find their supply chains completely broken if they lost 30 percent of their labor force for some period of time.

As for the effects on demand, Cooper said that people would no longer buy nonessential goods. Meanwhile, there would be panic buying of water, food and essentials, resulting in shortages. Furthermore, the market for discretionary spending would suffer massive deflation.

In fact, the pandemic′s effects on trade could be more problematic than the disease itself. "Trade and travel will screech to a halt." said Michael Osterholm of the Center for Infectious Disease Research and Policy. That is dangerous in an interdependent world. When a single region becomes infected, the entire supply chain is affected. Osterholm predicted that hospitals would be fighting the disease with 1918 medicine and equipment because virtually all imports would be cut off.

Since modern medicine will probably be of limited availability, Osterholm suggested that the "developing world will be better off" because these countries are self-sufficient, relative to the developed world, where people are used to having water delivered and having others bury the dead. "We'll run out of caskets overnight," he said. "In a time-to-order world, we′ll have trouble."

Although these scenarios are bleak, one panelist offered hope. Tara O′Toole of the Center for Biosecurity at the University of Pittsburg Medical Center, claimed that scientists could fix the flu problem within six years. She called for a new Manhattan Project that would gather scientists in an effort to find a quick treatment and a cure for the virus.

All the panelists seemed doubtful that a cure could be achieved within a six-year time frame, especially given the nation's inability to provide effective leadership to prepare for natural disasters, such as Hurricane Katrina. Even if a cure could be found within six or seven years, the panelists thought the chances of another flu pandemic occurring well before then were quite high. So the overall conclusion remained grim: The world will probably be underprepared for the heavy health and economic toll of the next major flu outbreak.

According to Scott Randall of BrandGames, the companies that succeed in attracting and retaining talent are those that have a strong culture and a strong sense of where they′re going. Companies have unique needs, suggesting that the skills required to accomplish one company's goals are not necessarily those required for another's.

The panelists discussed two sides of the question of grooming future leaders: recruiting and recognizing those leaders, and what to do with them once they're in the fold.

A key to hiring the right people is, as Rusty Rueff of Snocap pointed out, understanding employees' dreams, ensuring that those dreams and motivations match the company's mission, and finding ways for employees to achieve their dreams. At the same time, Mary Anne Walk of Walk & Associates explained that in order to attract the right people, companies should integrate their recruiting strategies with their overall business strategies, so that the hiring processes and priorities support strategic planning. Too often, as Jeff Cohn of Bench Strength Advisors stated, companies have "broken" success processes. Integrating recruitment strategies with company missions dictates a different way of thinking about who the "right" people are and what to do with them.

What should a manager do with a talented new hire? Although the panelists agreed that training and development are crucial, Randall also pointed out that overtraining can be evidence of insufficient business and human resource strategy. The panelists agreed that the younger generations of workers want to have control over their career paths and may be less receptive to employer efforts to set those paths.

In addition, the panelists discussed the difficulties of helping employees transition from "professional doers" to supervisory roles; they addressed the "disconnect" between the skills required for certain jobs and those required to succeed in managerial roles. The panelists also agreed that bringing outsiders into an organization can improve competitiveness and creative capacity, but that this transition can be difficult and should happen gradually and with support from longer-term employees.

Moderator Laura Morse of Atlas Venture brought up the question of how to compensate rising stars, and the discussion quickly moved toward ways to handle the balance between training and rewarding "high potential" employees, and retaining those who work hard but may have more limited potential. The panelists also commented on how human capital issues are changing in an increasingly globalized world, and agreed on the importance of exposing employees to other cultures and reducing restrictions on immigration in order to maintain American competitiveness.

Philanthropic spending in education is only a fraction of that spent by local, state and federal governments ($1.5 billion versus more than $400 billion in 2005) but represents a significant proportion of the discretionary funds available for reform. Regardless of the focal unit, whether it is students, individual schools, classrooms and teachers, or school districts, the panelists agreed that innovative approaches are desperately needed. They shared the challenges and triumphs they have encountered while working at each of these levels.

Tennis star Andre Agassi discussed the critical success factors for his charter school in inner-city Las Vegas, which has received national recognition for its effectiveness in raising the performance of students. His vision for the Andre Agassi College Preparatory Academy is to show that education can be a "different experience." His charter school's use of eight-hour school days, performance-based teacher contracts and stringent standards for student conduct and parent engagement have proved that such a transformation is not only possible, but highly effective.

On the other end of the size and scale spectrum, The Broad Foundation focuses on reforming large urban public school districts, which educate more than 40 percent of America's schoolchildren. Dan Katzir of the foundation emphasized the critical role of leadership at the superintendent level -- "great principals make great schools" -- and described the foundation's focus on developing and placing talented managers from both within and outside the education sector. The foundation employs rigorous performance and accountability measures for its grants, investing not only money, but intellectual capital and resources to make a difference for urban public schools.

Several of the panelists mentioned the need for engagement from all sectors, and Stanley Litow of IBM demonstrated the role that corporations can play in catalyzing innovation in education. "Great schools require great teachers," he noted, adding that the IBM foundation has developed an innovative program to train and support individuals interested in second careers as teachers, particularly among the ranks of retiring IBM employees. In addition, the foundation is developing a portfolio of creative, interactive educational lesson plans to help support teachers in the classroom.

Thomas Boysen of Classroom Solutions disagreed with Litow that better teachers are the answer. Instead, he argued, the key is that education must develop a "lust for innovation," both within and without the system. One critical component is accountability for results, founded on clear standards and constant feedback. Although many critics argue that tests can "dumb down" teaching, Boysen argued that the opposite is equally true. The No Child Left Behind Act demonstrates that effective tests are the best way of elevating standards, he said, noting that he is optimistic that this orientation toward results will lead to significant improvements over the next few years.

Education experts agree that there are no easy solutions to the growing education crisis. However, today's panelists have demonstrated that philanthropic efforts can make and are making significant contributions. Education reform is not only possible, but also critical to the future.

Shegerian passed the discussion to Jeff Hunts of the Waste Recycling Program. Hunts, who has been active in E-waste reform, explained the evolution of California's SB-20/50, an incentivised fee program designed to encourage electronic recycling while it creates a statewide fund to cover transportation and processing costs. This program is the nation's first in the electronic field and resulted in $70 million in fee-based state revenues and $30 million of incentive claim payments. The greatest success was in the 70 million pounds of recycled E-waste recovered by the program; Hunts estimates that this will double to 140 million pounds at the end of this year.

The original SB-20 was unique in its fee-based incentive structure, which mimics bottle recycling fees in Maine and Washington. Hunts suggested that problems in execution with these programs have to do with government administration rather than intrinsic flaws. This turned the conversation to a discussion of the ideal regulatory and administrative structure. David Thompson of Panasonic continued the thought by explaining how his company deals with E-waste on the corporate and home consumer levels: Large businesses are cooperative, but private users rarely are willing to take the initiative to recycle electronic waste because of the costs involved. Similar comments around the table provided support for SB-20's fee based structure, possibly with administration driven by a third-party foundation.

Bill Shireman of The Future 500 supported that opinion and then addressed the state′s electronic recycling infrastructure. He suggested that E-waste problems were rooted in the lack of an appropriate infrastructure to make home users' recycling goals plausible; right now, the effort required and lack of an incentive doesn′t make recycling worth the trouble.

The panel as a whole addressed China and India, both of which are producing electronic waste at an alarming rate. Shireman pointed out China′s potential as a secondary market for recovered American electronic waste but agreed that the growing country′s own waste is an increasingly relevant environmental hazard.

Shegerian closed with passion similar to that of his opening, challenging the roundtable to answer the environment's call. He invited all who care for the environment to support efforts to safely dispose of and recycle electronic waste.

Panelist Dennis Chu of Cambridge Associates identified three mechanisms by which hedge funds can influence corporate governance: through direct investment or direct lending, through activism, or as catalysts or participants in mergers and acquisitions.

Much of the discussion focused on the so-called "activist" funds, which panelists agreed represent a very small percentage of the approximately 8,500 U.S. hedge funds. Managers of these activist funds generally target corporations with poor market performance or those that are temporarily vulnerable to interference. In these cases, hedge fund managers are usually not seeking improved corporate governance, but rather are interested in breaking up or selling the company. One panelist suggested that some funds aim to be "friendly activists," though moderator Tom Cole of Sidley Austin replied that most corporate boards would assert that such an expression is an oxymoron.

Overall, however, the panelists agreed with the suggestion by Daniel Yih of Golder Rauner that hedge funds are actually making the market more efficient because they are less intrusive investors than traditional shareholders or venture capitalists. Josh Friedman of Canyon Capital Advisors noted, though, that the nature of hedge funds is shifting as the government is beginning to impose stricter regulations on the sector. The most visible implication of these restrictions is the increasing number of hedge funds that are shifting toward a more locked-up structure, in which investors have no access to their funds for a specified, often longer period of time. Still, Cole asserted, the "ultimate social utility" of hedge funds continues to be positive.

The panel also discussed the future of the investments market, with Cole asking the panelists what they believe the market will look like in 10 years. Friedman expressed the sentiments of most of the panel when he suggested that the differentiation between hedge funds, mutual funds and private equity markets will continue to exist in the future, as the knowledge and expertise needed for each sector becomes more specialized. Chu also conveyed his belief that an economic downturn would cause people to abandon traditional investment vehicles and move into the hedge fund market.

An underlying theme throughout the discussion was the wide variety of funds that are classified as hedge funds and the wide range of strategies that managers use. Chu listed more than 10 different types of strategies used by these funds, ranging from investing in distressed sectors to strict quantitative strategies. All of the panelists agreed that the nature of the fund depends on the nature of the manager, and that investors must recognize that facet of hedge fund investing. Friedman gave perhaps the most accurate explanation of this phenomenon when he quoted a friend who said that hedge funds are "like dogs: a lot of different breeds, one name, but they all look like their owners."

A key theme was the shared belief that nonprofit foundations needed a good business model in order to operate in a productive manner. Carl Schramm of The Marion Ewing Kauffman Foundation emphasized the need for entrepreneurship in philanthropy by proclaiming that his foundation recruits businessmen for management positions. Philanthropy is not contrary to capitalism, he said, noting that one of the greatest aspects of the United States is the fact that many of our wealthiest citizens do not horde their wealth but reinvest it and donate it into our economy.

Michael Milken emphasized the need for passion in philanthropy. Although there is little economic incentive driving charitable foundations, he said, a different and major incentive is the belief that one is making a difference and creating productivity in a powerful way. He noted that 50 percent of men will face cancer in their lifetimes, along with a third of all women. One path to reducing this number is philanthropy. Change can only occur through putting up your own money for a cause, he said, or mobilizing a large group of people behind that cause.

Tour de France champion Lance Armstrong, who is also founding director of the Lance Armstrong Foundation, described his dream of spurring change in the battle against cancer by "creating an army." His "Livestrong" bracelets have raised millions and inspired many to contribute to the fight against cancer. He criticized the Bush administration′s cancer research funding decisions and said that the easiest way to make a difference is to increase preventive screenings in urban areas. The failure to provide screenings is "saving a dollar today in order to spend a dollar later," he stated.

Near the end of the panel, respondent Kathy Giusti of the Multiple Myeloma Research Foundation and a cancer survivor, said that sharing information was important. The Multiple Myeloma Research Foundation tells each donor precisely where his or her money has been invested. The foundation also provides information about all decisions, including less successful endeavors. This involves the donor and provides accountability for the foundation.

Neal Soss, managing director and chief economist of Credit Suisse, started the panel discussion, painting strong economic prospects for the world economy.

Soss noted that both the United States and Japan are currently growing above potential, as demonstrated by the decreasing unemployment rates. He expects current government policies to be supportive of this environment with the continuation of loose fiscal and monetary policies. With this in mind, he described the market dynamics as a rolling bubble that could move from current housing mortgage market to the commercial real estate and stock markets.

Ellen Griggs, a managing partner of New England Pension Consultants, said she advises her clients to focus on asset allocation. The traditional diversification strategies no longer apply, she said, and investors must look at "the big picture," which includes analyzing and managing their liabilities, as well as giving managers more leeway to generate alpha.

Maria Boyazny, a principal at Siguler Guff & Co., expressed her worries with the overextension of the credit markets. She expects the current historically low default rates to rise as the lower quality credits dominate the new issuance. "I believe that we are at the peak," she noted, "or have gone past the peak of the credit cycle."

With a slightly less sanguine view, Lawrence Post, chairman of the Post Advisory Group, pointed out that the current low level of spreads could be explained by both profits and the easy access to capital. He expects that the new issuances to widen the spreads by as much as 25 basis points.

The panel debated the role of traditional managers versus hedge fund managers, as well as changes in the current pension fund mandates. In particular, they emphasized the need for pension funds to allocate with respect to their liability profiles, and highlighted the need for U.S. pension reform.

David Blake with Principal Global Investors, who moderated the session, also asked about the impact of expanding credit derivatives market. The debate was centered on the large amount of outstanding derivatives compared to the issuance size. Soss highlighted the positive impact of dispersing credit risks through many participants, while Boyazny pointed out the existence of "short-squeezes" contributing to market volatility.

The panelists approached a myriad subjects including, the emergence of the second lien market, the future of the U.S. auto industry, current opportunities in distress investing and the economic prospects of the emerging economies. The session ended with the sharp contrast between the positive economic outlook that, according to Soss, explains the current price levels, and the historically low spreads that Boyazny maintains indicate an overextension.

Moderator Mark Lam of Live365 then posed the following question: How do you think the White House handled the recent visit of President Hu Jintao? While the panelists came up with various responses, James McGregor, author of One Billion Customers, stated that he thought the administration had clearly missed its goals with respect to China, as well as its focus of doing business in China or meeting with Chinese business leaders.

"The Chinese have the overall perception that the U.S. is too much trouble to do business with," he said, in response to a question about possible remedies to the trade imbalance.

The trade deficit today is structural, he added, noting that the real issue for China is intellectual property rights, which have "definitely gotten better, but are far from good enough." Lam suggested that that these issues would not go away because of the "inherent economic underpinnings (of each country). In order for industries to develop, they must develop their IP." He gave the examples of Taiwan and Japan, which used to have poorly regulated property rights. McGregor responded that China's neglect of IP rights has been far worse and should not be allowed to continue.

China's trade with Asia has been exponentially increasing, and it was noted that Asia could become a trade bloc that has no need for the United States; since 1990, the number of mergers and acquisitions with publicly traded companies between China and other countries has increased dramatically, from 1,500 a year to more than 9,000.

"When going into an emerging market," said Jonathan Colby of The Carlyle Group, "one of the first things that we look at are banks." Stoyan Tenev of the IMF said that "consumer-oriented sectors are attracting the most investments -- the Chinese consumer is particularly exciting to all of us." Discussing the advantages and disadvantages of diversified state-controlled companies vs. private banks, he said that "investments in state-controlled banks do not always provide the greatest incentives."

Wei Wang of China M&A Management Holdings added that the Chinese banking sector needs fundamental change; the changes being made today are symbolic, he maintained, rather than fundamental. However, the panelists agreed that there has been significant reform recently, with Tenev stating that nobody "expected such fast privatization of state banks, which has been very significant." Colby also noted that health care appears to be a very attractive industry that multinationals will eventually get into.

The panelists then discussed China′s fragmentation of industries, noting that fragmentation is lower in state-owned industries, but still high. Fragmented industries irritate and excite investors at the same time because while there exist poor market designs and pressures from non-regulated business practices, but there is a lot of money to be made, as well as consolidation in specific fragmented areas (such as steel, cement and retail). The panelists agreed that this type of excessive industry diversification offers an abundance of M&A opportunities to Chinese entrepreneurs today.

Wang closed the panel, emphasizing that China is still not a developed country, but indeed one that is growing and learning. He compared China to an adolescent "on a very sharp learning curve, where entrepreneurs are trying to realize their dreams."

The panelists agreed that the Russian market has offered some of the most extreme investment risks and rewards during the past 20 years. For example, in the 1990s, Torstein Hagan of Viking River Cruises bought and sold shares of Gazprom, a Russian natural gas company, at staggering 750 percent profit in just a few months. He then started a Russian river cruise business that is booming today. In contrast, Roland Nash watched his Russian investment banking business soar and shrink again twice in the past five years. Yet both men are still in Russia and feel that the long-term opportunities outweigh the risks.

It is widely known that natural resources have been a great source of investment in Russia. Hagan said he believes that Russian energy companies are still undervalued and hold the promise of continuing future profits, especially given increasing global energy demands. On the other hand, although Russia′s "decaying" infrastructure is in desperate need of investment, foreign participation in these types of projects is limited by local regulations and customs. Instead, Richard Sobel of Alfa Capital proposes to channel foreign investing into consumer goods market. As evidenced by recent success of companies like IKEA in Russia, the growing Russian middle class is increasingly looking to spend its disposable income on good-quality products.

The panelists also remarked on the state of education in Russia. The quality of scientific education in the Soviet Union was extremely high, and Russia has a very well-educated work force that is currently leveraged by high-tech companies, such as Intel. Vladimir Tyurenkov of Hansberger Global Investors noted that Russia needs to maintain its high education standards in order compete in high-tech outsourcing market and transition to a "knowledge-based economy," where India and China currently outpace it. Both Sobel and Nash agreed that development of the professional middle class in Russia is critical in stabilizing its economic and political situation, and improving opportunities for foreign investment.

Audience members asked the panelists to speculate on the outcome of the 2008 elections in Russia. Although the speakers said it would be hard to predict, they each offered a best guess. Tyurenkov did not think that Putin would put himself up for re-election, although he is immensely popular and it is very likely that people would vote him in for a third term. Sobel predicted that we will see someone from the current government replace Putin, very likely, someone like Alexander Medvedyev. Hogan and Nash agreed that they do not foresee anyone from extreme national parties get elected. Generally, their comments conveyed an optimistic outlook on the future of Russian political stability and on the future of investment opportunities there.

The discussion revolved around three key areas of improvement: 1) a change in Israel's capital markets so that they are more visible internationally and have more domestic investors; 2) retention of the technology knowledge within Israel as more outside venture capital firms invest in local companies; and 3) improved transparency in the system and a decrease in the regulatory restrictions on capital flows. The panel was in agreement that working toward all these goals would help Israel become more financially independent.

Steven Schoenfled of Northern Trust Global Investments suggested that Israeli firms should work on listing in multiple markets, as this might stimulate the amount of capital flow into the country. In addition, Israeli companies need to increase the amount of "float," or share of the company, available to the public. Schoenfled noted that by freeing up float, institutional investors, like the Jewish Federation, would be more likely to invest. Schoenfled said that a latent demand exists for these types of investments, due in part to the fact that there are not enough different types of financial instruments, such as stock index futures.

One of the shining stars in the Israeli economy has been the tech sector, where many companies do list on multiple exchanges. Eitan Ben-Eliahu of East West Capital attributed some of the country′s technological successes to exportation of its military research. Nadine Baudot-Trajtenberg of Bank Hapoalim noted that because of the success in technology, many international venture capital firms support small companies in Israel. However, the VC firms' presence has resulted in local technology knowledge being sold abroad. Thus, Israel is exporting a key asset for its economic growth. In order to continue growing, companies must feel encouraged that there will be local investment. The panel agreed, however, that technology cannot be the only solution. Despite the power of these technology companies, their success was insufficient to pull the economy up from 1998 through 2000. In addition, Ben-Eliahu noted that the security of the country posed a human resource drain on the economy because men are required to serve in the military until age 27 or 28, and only recently were women allowed to decline to serve.

Finally, Mathew Bronfman of ACI Capital noted that in his recent acquisition of the third-largest bank in Israel, one of his key concerns was the amount of regulation in place which deterred investment. He claimed that if the government focused on more transparency in business, as well as reducing the restriction on capital flow, it would help the economy grow.

The session concluded with some audience questions of the panelists. Asked whether Israel needs a Community Reinvestment Act to encourage and support lending to small and medium-sized businesses and underserved communities, both the Bank Hapoalim and Israel Discount Bank (the first- and third-largest banks) responded positively.

The panel concluded with a poignant question about the lag in the real estate market in Israel. Earlier in the session, the panelists noted that Israel was one of the few countries in the emerging market category that has not experienced a real estate boom, which has been a powerful growth mechanism for many countries. Ending on a positive note, Bronfman and Baudot-Trajtenberg noted that the real estate market had shown signs of improvement recently, which might be a further catalyst to the country′s growth.

Both men are known for their die-hard perseverance and athleticism, but the nature of those qualities differs between Armstrong and Agassi, reflecting the differences in the nature of the challenges posed by their respective sports. For Agassi, perseverance can be likened to a transcendence of time. "For me, it′s always been about the process," he said. "Every day I just try to get one day better."

By focusing on the conditions and challenges immediately before him, he said, he has grown and evolved, adapting his game to new opponents and technologies, and enjoying a 20-year career in a sport where most winners only briefly shine. "In tennis, you don't have to be good," he noted. "You just have to be better than one person (at a time)." Agassi is currently gearing up to compete in Wimbledon and the U.S. Open later this year.

The challenges Armstrong has faced give his style of perseverance a slightly different flavor. In the early 1990s, he was emerging as a competitive cyclist. He won the 1990 U.S. Pro Championship and, by 1996, was ranked the No. 1 cyclist in the world. But that same year, he was diagnosed with testicular cancer, which had spread to his abdomen, lungs and brain. The doctors said his chances were less than 50-50. He underwent intensive chemotherapy, was able to fight back to health after two years and then kept the victory streak alive by winning seven consecutive Tour de France titles.

Determination comes naturally, he said, whether it's used to pedal up a hill or fight back a deadly disease. To be a great athlete, he said, you need both favorable genetics and the right attitude, but he was quick to add, "I think that the mental part of it is greater than the physical part."

Armstrong doesn′t regret his decision to retire. "My kids don't live in France," he said, and he is tired of missing important moments in their development. He also has more time for the Lance Armstrong Foundation, which supports the cancer community's battle with their illness. "Athletes are forgotten," he said. "Sports fans move on to the next athlete, but cancer patients will be there forever. ... When you have to divvy up the time in the day, those (cancer patients) are the people you've got to focus on."

In 1994, Agassi founded The Andre Agassi Charitable Foundation to help provide recreational and educational opportunities for at-risk children. "I hope to leave tennis in a better state than I found it," he said, "and I hope to leave the world in a better state and make a difference."

Moderator Diana Nyad asked how the two men stay focused on their sports, and Agassi replied that he has a wife and business partners whose support allows him to concentrate on tennis. "At the end of the day, I'm a tennis player," he said, "and I′m going to do that until I don't feel like I'm performing my best anymore."

"There are many winners, in cycling and in tennis," concluded Nyad, "but champions are people who've stepped out of their sport and touched humanity."

When will a mass market develop for the type of recreational space travel currently available only to those who can afford the $20 million price tag? Currently, several organizations offer space trips to consumers, with offerings ranging from a few moments of weightlessness to trips into orbit.

What about government's role in the effort? Anderson and Diamandis contended that the government's main responsibility in the development of space travel is to stay out of the way of commercial enterprises in this pursuit, and to offer incentives for further private company developments. Naderi provided another perspective, advocating a role for government, particularly in the areas of defense (including from asteroids).

Regardless of the role government may play, the panel agreed that the opportunities for space exploration are poised to increase dramatically. Whether mining asteroids, engaging in space tourism or searching for life on other planets, the potential is tremendous.

Toward the end of the program, Diamandis predicted that the world's first trillionaire would be a space magnate. Let the new space race begin.

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The face of the U.S economy is shifting rapidly, and American workers are experiencing its growth pains firsthand. Andrew Stern of the Service Employees International Union remarked that while America′s GDP may be increasing, American wages are not. According to Stern, seven out of 10 Americans currently live paycheck to paycheck and the No. 1 resolution among Americans this year was to get out of debt. He worries that politicians are not recognizing or addressing the American workers' desire for financial stability. He called for the return to citizen action and stressed the need for Americans to get out and show their representatives that change is needed.

Jeffrey Kindler of Pfizer Inc. said he felt that America is losing its innovative edge. He pointed to the decrease in American science and engineering students as a major source of concern for America′s future. Thomas Donohue of the U.S. Chamber of Commerce commented that 30 percent of American students are not graduating, further stressing the concern that America′s youths are not prepared for the future.

Doug Holt-Eakin, former Director of the Congressional Budget Office, asserted that America also needs to worry about older workers. He reminded the audience that the average life span is increasing all over the world, dramatically changing the flow of labor and capital. The market is becoming more global, and international industries are currently the most productive industries. He sees a need to prepare older workers to deal with international competition.

Donohue agreed that workers are living longer and questioned who will support these workers when they retire. He asserted that workers cannot expect the company pensions that were commonplace 50 years ago, and that increased worker productivity means fewer people paying into social security. Holtz-Eakin agreed that the great experiment of social security is over but stressed that the people should understand that the policy process supports them. He contended that people will be paid the benefits owed to them; however, government needs to make changes for the future while honoring its current promises.

From there, the discussion made an easy transition to health care. All panelists agreed on the importance of revamping the current health-care system, but they differed significantly in their solutions. Kindler argued for more action in preventative care. He said that the percentage of undiagnosed illness is way too high in America, and that as a country, we are not doing enough to lower our risk of illness. He stated that the ideal health-care scenario would include cooperation between government, the private sector and unions to put greater emphasis and more money into preventative medicine. He called the current system a "sick-care" system, where the riskiest portions of the population are being treated in the worst possible way: They enter the system only after their illness has progressed to emergency-room status.

Holtz-Eakin spoke up to say that no solid scientific evidence exists yet to demonstrate that preventative care really saves money. At best, it may help extend life expectancy or improve quality of life, and said we need to acknowledge that health-care costs have always outpaced income per capita. This is attributable to rapid changes in technology embraced by Americans, he explained. To reduce costs, he suggested adopting a more selective approach to technology changes. Instead of embracing every new approach, American health care needs to consider the costs of technology and weigh its worth.

The session brought up interesting and important points that need to be addressed in U.S. domestic policy. America appears to be continuing as a strong force in the global economy, but it must address some of these key issues domestically. Policy-makers need to place greater emphasis on improving the situation for the American worker, specifically, to increase wages, redesign retirement plans and ensure health-care access to all citizens.

Maria Boyazny of Siguler Guff & Co., expressed concerns with the levels of non-performing loans in the Chinese banking system going forward. State-controlled banks have financed overinvestment in certain sectors and might be subject to higher default rates as growth shifts to other areas of the economy.

Frank Sixt of Hutchison Whampoa addressed the interactions of domestic and foreign policies. He emphasized that the sheer size of India's and China's domestic policy agendas actually shaped their foreign policies, as exemplified by their growing need of commodities and energy products.

Ramesh Vangal, chairman and founder of the Katra Group, placed India's influence into perspective, suggesting that India offers a counterbalance to China′s emergence in the region. India development has been primarily led by domestic consumption and is mainly focused on the service sector. Even more contrasting is the evolution of India's democracy. With a freer and more pluralistic society, India has been able to show more progress in developing domestic institutions, such as working capital markets and its accounting system, thus balancing China′s central planning and non-democratic system.

The former U.S. ambassador, Steven Green, placed more emphasis on the U.S. political processes. In particular, he argued for the need of the business community to educate the American public on the real effects of a globalized economy, in an effort to counteract the fear being spread out by some political players.

Perry Wong, a senior research economist with the Milken Institute, provided insight into the strong regional and global integration processes. He described China not only as providing resources, such as labor, but also an important re-exporter for the region. Wong discussed the impact of a potential revaluation of the Yuan, not only on the region but also on the global companies present in the Chinese economy.

The panelists approached various aspects of how the different economic and political processes could evolve, with particular emphasis on how their political processes might shape world order.

Christopher Melton of the White Oak Group said he considers management to be key for success with the middle market. His goal is to nurture the businesses through their first few years, during which banks are usually too risk-averse. Part of the process, though, is a considerably more intense monitoring of the company′s well-being. As Michael Milken observed, banks traditionally would look at credit periodically, once a year or quarter. Today's growth financers look weekly. Boehly's clients pay their loans monthly, rather than the traditional quarterly, so he receives a relatively quick feedback on the companies′ fitness.

Boehly credits Guggenheim Partners′ success to its "reputation for closing and listening." Several of the panelists emphasized the importance of working closely with the client to understand his or her needs. Richard Rainwater of Rainwater Inc. recalled that his best investments and long-term relationships were based on giving respect, not just a check. His clients appreciated knowing that "their quality of human capital was worth someone taking a risk on." The clients needed to learn from the financers, as well. Boehly explained that many of his clients are entrepreneurs who are extremely knowledgeable about their business, but not about financial markets. They need to be educated. Given that these companies are still being financed on credit cards and second mortgages, they′re happy to learn, Milken added.

One of the hardest lessons, Milken said, is that "the best time to finance is when you don′t need the money." Boehly recalled an example of an oil company in Venezuela that passed on acquiring financing; now that Hugo Chavez is in power there, the company can′t get any. Kevin Murphy said that this "division of labor" allows each person to do what he does best: The entrepreneurs innovate, and the financers to set up financial structures.

The conversation turned to credit ratings, which most of the panelists found misleading. Boehly explained that a loan doesn′t have a monolithic risk; it has tiers of risk. For instance, the first dollar is almost guaranteed to be paid back, deserving an AAA rating. Rainwater concurred, observing that many securities are money-good, even if credit-bad; one should consider the price they are trading at. Milken explained that this is because there′s no real penalty for rating a company too low. Newer companies are particularly susceptible to this bias, while older companies tend to get rated too highly, out of inertia.

Spreading capital to the middle market is vital for job creation, Milken said. From 1970 to 2000, the Fortune 500 Companies actually cut 4 million jobs. The smaller, newer companies created new positions. However, Murphy found this focus on job creation misguided. He countered that the real growth in an economy happens through efficiency. When Fortune 500 companies decrease their work force, they didn′t lose money. Rather, they free up labor for other enterprises.

All the panelists agreed that a new company′s most important asset is its human capital. Murphy stated that there has been a rise in return to human capital, and Milken concurred, mentioning the increased incremental rate of return for going on to gradate school. He suggested that the national savings rate should take investments in education into account.

All of the panelists felt that growth financing in the United States was about taking a close look at smaller companies with strong management. They recommended careful research to see beyond the credit ratings for good investments. They felt that these businesses, with careful monitoring and nurturing, could be very profitable.

According to Doug Wilson of Townhall.com, the most important factor to the success of the U.S. economy is the preservation of the U.S. "social character." This social character, which Wilson said gives America its competitive advantage over the rest of the world, is based on the idea of individual responsibility and on an individual′s power to take risks, be entrepreneurial and innovate. However, Ed Feulner of The Heritage Foundation and Louis Uchitelle of The New York Times agreed that current government and corporation policies toward the economy do not, in fact, encourage this sort of individual initiative.

Uchitelle focused his remarks on the often ignored social costs of layoffs, asserting that the "experience of being laid off is quite severe" and can thus have implications for American economic success and competitiveness through its effect on individual workers. From Uchitelle's perspective, economic success is a social issue and thus needs to be discussed and debated as such. Feulner took a different view, however, suggesting that rather than focusing the debate on social issues, the government must deal with the serious challenges posed by "the big three: Medicare, Medicaid and social security."

Toward the end of the discussion, moderator Joel Kurtzman of the Milken Institute asked the panelists what they believe are the most important policy proposals to ensure U.S. economic success. Wallace named fiscal responsibility and infrastructure investment. Wilson asserted his faith in the importance of the empowerment of the individual and suggested increasing the number of visas available to foreign Ph.D. holders in order to reverse the "brain drain" of educated individuals out of the United States. Uchitelle reiterated the importance of recognizing the true costs of layoffs and proposed requiring corporations to file annual impact statements detailing their firm′s labor force activity. Feulner said the U.S. government should seriously expand free trade, get entitlement programs under control and avoid tax increases that he believes will slow economic growth.

All the panelists did agree, however, on the need for greater public and governmental debate on solutions to problems of American economic success and competitiveness.

Held up as the quintessential example to the contrary was the Li & Fung Group, which has achieved a remarkable level of fluidity within a new, "network-centric" business model. At Li & Fung, products are assembled from parts produced throughout Asia in such a way as to maximize comparative advantage by catering specifically to each customer's unique needs. Barbara Meynert asserted that creative resourcefulness makes it possible to create value for the entire supply chain, and ultimately for the consumer. One means toward this end is the utilization of teams for each individual project that share incentives with the customer to be efficient and provide a high-quality product. Another method is the use of local people as "orchestraters" of operations on a region-by-region basis.

All the panelists agreed that for a network-centric business to thrive, it must develop relationships of trust based on financial transparency and fair reward incentives. Philip Evans of Boston Consulting Group noted that these relationships often take longer to form, but that the returns speak for themselves when compared to the traditional management style of the old firm-centric model. Examples cited were eBay and Amazon, and the use of consumer feedback by both to garner the trust of the community that uses their services; a bad review of a book may seem counter-intuitive in the short run, but in the long run, the trust it creates produces extraordinary returns. In the case of Toyota, it was pointed out that shared intellectual property rights facilitate faster technological innovation, compared with a lack of openness in GM.

In addition to fluidity, trust and transparency within a given business, increased efficiency can be found in the network-centric model via the consumer themselves, who in many cases take up responsibilities like design free of charge. The example of threadless.com was presented in this light, where customers design their own T-shirts. Open source software and the success of Linux, in particular, is perhaps the best example of this trend.

While the panel focused for the largest part on these various strategies to increasing comparative advantage within the network-centric model, the starting point for each of the panelists is that the network form does indeed provide a competitive edge. The question, then, becomes one of transition, or what Meynert characterized as a "mind-shift" away from the firm-centric model.

In responding to a question from the audience as to whether or not the American culture of individualism represented a potential barrier to entry into network-centric businesses, Meynert shared the moment when she herself first "saw the flat world" in a group of tech-savvy youngsters. Evans provided the example of Lexus Canada for successful North American network-centric business, but he also acknowledged that mind-shift is not a trivial concern, and not always easily achieved within the existing corporate structure.

Federico Sada Gonzalez of Mexico′s Viitro, S.A. de C.V., described the change in terms of what used to be big fish and little fish. Now, he said, the fastest fish eats them both. Perhaps the gorilla in the room is not a problem with the existing paradigm, but rather our failure to recognize and successfully transition to a better one.

American secondary education has a fine tradition as the "engine of innovation in the U.S. economy," according to moderator Tom Mitchell of New Schools Venture Fund. Yet the current pace of globalization means that these institutions face challenges that are distinct from those addressed in the twentieth-century American education model.

American college graduates have traditionally lacked a global perspective. Eighty-seven percent of college-educated Americans cannot find Iraq on a map; 65 percent cannot find France. Overall, just one in five Americans has a passport. Panelists concurred that this is a problem in today′s world. As Ted Sanders of the Cardean Learning Group noted, "We ought to all get a steady diet of culture and international information." Primarily, however, panelists focused their discussion on meeting the international (non-U.S.) demand for American-style education.

Panelists used China as a case study of the changing face of global secondary education. High foreign direct investment, growing GDP, a demographic bulge in the 18- to 22-year-old population, and the single-child policy that results in the "little emperor" phenomenon -- where six adults invest in one child -- all mean that the demand for English-speaking, American-style education is increasing. Indeed, private education funding in China had a compound annual growth rate of 25 percent from 1994 to 2003.

The innovative responders to this challenge thus far have not been the traditional elite American universities or even public American universities, according to Edward Guiliano of the New York Institute of Technology. Instead, they are mostly private secondary education institutions. Guiliano characterized these institutions′ response as the "globalization of education," in which universities are thinking globally but serving people locally through on-site international offices and online learning. This enables local communities in the Middle East, for example, to meet the global challenges they face in a sustainable manner.

Yet panelists concurred that these institutions′ response to globalization, as well as that of their American and international counterparts, is still a work in progress. As Mitchell observed, "The globalization of competition in education and the response of American and international universities over time will be very telling."

Each of the panelists expressed concern over such actions as the call by Sen. Chuck Schumer for tariffs on Chinese imports or the recent uproar over the sale of U.S. port operations to an investment group from Dubai. And it is not only in the United States that there are signs of protectionism. Countries like France and Italy are also increasingly engaging in such measures and resorting to protectionist rhetoric in order to combat what they see as the "danger" of globalization.

Except for the protectionist issue, the panel members agreed that they see a generally benign outlook for the global capital markets, forecasting a continued pattern of low volatility and generally attractive financial market conditions. Jackson said he favors alternative investments, such as hedge funds and private equity. Suzanne Nora Johnson of Goldman, Sachs & Co. likes uranium as a cheap energy source and thinks uranium producers or even uranium futures might make an attractive investment.

Australian James Packer, Brian Fabbri of BNP Paribas and David Rubenstein of The Carlyle Group were all bullish on Asia. Packer favored China, in particular; his top idea would involve opening an equity research shop in Shanghai, as he sees this as an underserved market with fantastic growth potential. Rubenstein was a strong proponent of diversification, cautioning investors to avoid putting all of their eggs in one basket. Rubenstein favored investments in renewable or alternative energy sources. Fabbri was particularly excited by the dynamic growth prospects Asia currently offers, noting that this is in stark contrast to Europe and America.

The panel also discussed particular sector views. Rubenstein again extolled the opportunities available in the renewable-energy sector, not only in the United States, but also in China and India. Although excited by alternative and renewable-energy sources, none of the panelists felt that the current run-up in oil prices pose a threat to the strength of the economic expansion. They did note. Though. that at some level, a continued rise in energy prices would result in an end to the global economic expansion.

Fabbri and Johnson both favored the health-care and biotech sectors; demographic trends in the United States and around the world are extremely bullish for this sector in the long run, they predicted. Jackson produced perhaps the biggest surprise of the panel. Although the majority of the investment community has turned negative on the sector, Jackson's company continues to favor U.S. real estate. Finally, Packer discussed how his company was excited to have secured a gaming license in Macao, the island near Hong Kong that is forecast to soon surpass Las Vegas as the world's busiest gaming destination.

The one area of disagreement among the panelists was on the future of private equity. As the co-founder of one of the largest private-equity firms in the world, Rubenstein continues to be bullish on the future of the industry. Johnson was somewhat more bearish on the sector, particularly regarding the prospects for many of the newer entrants to the market.

Douglas Schoen, the former advisor to the Clinton administration, agreed that most recent polls show Democrats ahead in approval rankings on all issues but terrorism, and even there the gap is closing. These numbers, Schoen argued, reflect the general dissatisfaction the public feels with the way the Republican majority has handled important domestic and international issues during the past few years.

Frank Luntz, a public relations advisor to many members of the Republican Congress, admitted that the numbers look bad; however, he argued, polls are misleading. The questions often use polarizing language so that that the negative emotions they evoke overshadow more rational choices Americans typically make when they actually vote. The main crisis in the Republican Party, he claimed, is rooted not in ideology, but in the lack of clear and honest communication. "Republicans need to express what they mean!" Luntz proclaimed as he left his seat and headed for the audience, "and my job is to help them get the words right."

"So how volatile is the public opinion in the United States today?" Matt Miller asked. The data suggests that Americans are discontent with both Republicans and Democrats and that the fastest-growing party in America today is "No Party." Schoen believes that new swing voters will be deciding elections in the near future.

Both panelists agreed that unless the major parties start to communicate their agendas clearly and attract the voters back in, third-party candidates will have a viable chance at victory. However, they noted that running independently still remains a very expensive proposition, available only to the very wealthy.

Given where public opinion is headed, Schoen said he expected the 2006 Congressional elections to be a clear win for Democrats. Luntz reluctantly agreed, adding that a third of his Republican clients are pessimistic about their chances for re-election. However, predicting the outcome of 2008 presidential elections was much harder. Luntz noted that going by poll ratings alone in 2004 presidential elections, Democrats were in a great position to take office, but they still lost. He attributed this success to George W. Bush′s ability to relate to the average American and said that candidate "personability" is an important factor for the Democrats to consider when they head into the 2008 elections.

Klaus went on to explain that the European Union has many misunderstood and underestimated economic implications. The structure of the organization, which the he described as being "a social democracy, but far more social than democratic," ironically seems to have set the stage for populism and closure rather than its intended goal of openness. He continued, saying that further European integration and regulation might not satisfy a variety of economic interests, especially those of the United States.

Former U.S. Ambassador to Spain Nancy Brinker turned the conversation to the topic of the Czech Republic's upcoming elections. Klaus suggested that no matter the outcome, the Czech Republic would see at most marginal change with respect to EU policy, due to its political and economic maturity.

George Argyros, former U.S. ambassador to Spain, asked about the expansion of the EU. President Klaus announced his position in support of expansion to any and all countries ready for the move. The conversation turned to Turkey, specifically, and the Czech president reiterated his point, stating that culture and religion are not relevant to entry; the best interests of the EU and the concerned nation are the real issues.

The discussion closed with a dialogue revolving around the Czech Republic's impressive economic growth. Klaus attributed this to the nation's heavily industrial economy and returned to the issue of EU policy standing in the way of business. He stressed the importance of openness as the primary goal, not unified regulation.

Francine Kaufman of Childrens Hospital Los Angeles emphasized the need for a change in school and family environment. Obesity prevention, she said, is especially challenging in urban areas, where poverty, a lack of safe places to exercise and poor education lead to malnutrition among young people. She predicted that one in three children in the 21st century will suffer from diabetes if things do change. Educating children early in life about health benefits through phys-ed and other programs, and improving the nutrition offered in school lunches and vending machines, could make a significant difference, she stated.

Samuel Klein of the Washington University School of Medicine spoke about the benefits of weight reduction. While we have expensive procedures and medication for treating diabetes, coronary heart disease and other chronic conditions, the best way to target all cardiovascular and other obesity-related diseases is through weight loss. More specifically, he said, this weight loss must be achieved through calorie reduction and exercise, not shortcuts, such as liposuction, in order to achieve the health benefits.

Klein also spoke to the possibility that the ideal body mass index (BMI) may be much lower than previously thought. He mentioned an experimental group of middle-aged people, with normal weight, who reaped significant health benefits by lowering their BMI to around 19.

Caldwell Esselstyn Jr. of the Cleveland Clinic weighed in on the benefits of a plant-based diet. He provided the audience with a slide of chronic illnesses related to obesity in Norway during World War II. The slide showed a staggering drop in the incidence of these illnesses during the 1940s, when the Axis powers confiscated Norwegian livestock, and suggested that the drop was directly related to the decreased ingestion of meat and dairy foods. He maintained that the only thing Americans need to do in order to fight the vast majority of chronic diseases is to replace unhealthy fats (mainly found in animal products) with fruits, vegetables and whole grains.

Dean Ornish of the Preventive Medicine Research Institute also spoke about the need to change the way people think about food. Rather than turning nutrition into a guilt campaign, he said, we ought to make nutrition "fun, sexy, hip, crunchy and convenient." There is room for entrepreneurship and private interests in nutrition, he added, noting that two-thirds of Pepsi Cola's profits last year came from its healthier foods.

Finally, Harold Schmitz of Mars Inc. provided some of the company's recent nutrition research regarding chocolate. While he focused mainly on the improved blood flow that studies have shown comes from certain cocoa beans rich in phytochemicals, he also spoke to the two more general aspects of health that he believes need to change. First, he said, he would like to see nutrition science embrace the chemistry of food groups. Second, he would like to see a system that rewards the business sector for investments in nutrition as much as it reward them for pharmaceutical research. With these two aspects in place, he said, the private sector could accomplish much in the field of nutrition.

Stewart Paperin of the Open Society Institute identified the primary role of private institutions in promoting financial integration between the microfinance organizations that serve the poorest of the poor and the larger commercial financial institutions that serve the next tier of the population. The current disconnect between these two systems can impede the fight against global inequality, and Paperin argued that "connecting the dots" should be a priority for the private sector.

In addition, he said, the private sector can help inject back-end administrative and processing expertise and discipline into the process. Meanwhile, the government should focus on getting the rules and regulations right and philanthropists on advocating and demonstrating the feasibility of initiatives.

Susan Blaustein of the African Millennium Cities Initiative discussed what such a demonstration can look like. Her innovative work in sub-Saharan Africa is centered on three major initiatives: a green revolution in agriculture, a health revolution in addressing malaria and other illnesses, and an infrastructure revolution to develop the roads needed to sustain a modern economy. As Blaustein passionately noted, "We can′t wait because waiting means lives." The hope is that demonstration projects like the Millennium Cities Initiative will show that there are viable and effective solutions to these seemingly intractable issues, catalyzing investments in these areas.

As Lauren Burnhill from ACCION noted, microfinance models have proved very effective in addressing the subsistence needs of some of the poorest of the poor. The challenge today is on building scale and increasing the revenues of these micro-entrepreneurs to transition to traditional financial products. Commercial banks, such as Citibank, are beginning to show interest in this area, which may facilitate the bridging that Paperin suggested was so critical.

Ann Miles of BlueOrchard Finance was optimistic about the success that microfinance has had, but she pointed out that less than 1 percent of the overall demand has been financed on the capital markets. In addition to microfinance, the focus has turned to alternative means of financing, including bond issuances and structured finance offerings. Miles was hopeful that these recent innovations will pave the way for more robust private investments in efforts to reduce global inequality.

Investors have had a tremendous impact on combating global inequality, but the battle is far from over, and significant challenges remain. First, there is the issue of asset classification. As new financing models emerge, many are unclear on how to treat these new instruments, both from a risk and ratings perspective and as a matter of pure categorization. Second, it is critical to build the capacity of micro-enterprise institutions to bring offerings to market. And as these organizations begin to offer savings and deposit products, regulations may be required to protect these deposits and prevent potential banking collapses in times of crisis.

Liabilities management will be an important capability. Third, it is important to increase the visibility and acceptance of microfinancing to conventional investors, which includes improving the liquidity and attractiveness of these instruments. Finally, it will be critical to iron the role of local vs. international financial markets: Is the solution Wall Street or Main Street?

Financial investors have already made a tremendous impact in fighting poverty and inequality through innovative financial models. Continued, sustainable progress will require ongoing commitment and creativity, and the ability to make investment propositions that make social and economic sense.

President Vaclav Klaus of the Czech Republic stated that "we live in a tightly interconnected world" and that globalization has had a net positive effect. Stressing the importance of freedom and openness rather than protectionism, he said, "Communism has gone, but liberty and openness have not become our guiding principles." In particular, he said, Europe has shown a renewal in protectionist policies, with the EU prime minister proposing a fund for the "victims of globalization" in Europe.

David Rubenstein of The Carlyle Group stated that during this decade, "what happens outside the U.S. is just as important as what happens inside." He asserted that the United States would have to change in order to remain one of the world's great global powers, and that one of the fundamental changes would be to invest more heavily in foreign markets, as well as to allow more foreign direct investment. If not, he warned, the country would most certainly "run the risk of not being the economic power we have been for the last 50 years."

Gary Becker outlined the major engines of growth in the past year. He stressed the importance of the great productivity growth that the United States has seen in the past decade, as well as the explosion of growth in developing countries, and in China and India, in particular. One of the main drivers of future growth would be to give private-sector ample opportunities. He also stressed that the real risks lay in too much intervention by the government. For the long term, he noted, the most important thing for growth in the United States would be to keep the government from "messing up too much."

"Are we seeing an incipient re-inflation?" Gigot asked the panelists, and Becker stated that what we are seeing is a rise in relative prices rather than inflation. The other panelists concurred, with Rubenstein adding that there were far bigger problems than inflation today.

Panelists were asked if they were in support of the flat tax and whether such taxes drove the new policy changes in "Old Europe." Klaus was in favor of it but warned against thinking of it as a solution for other problems. Becker agreed, stating that they should "not think it as an 'open sesame' to a global economy." He also cited other problems that came along with the flat tax, such as how to tax the corporate sectors and other special groups. Rubenstein added that the United States has in effect a "back-door flat tax," and Becker concluded by saying more important than a flat tax to economic stimulation was having low taxes. Rubenstein stressed that there is a direct link between tax rates and the stock market.

Gigot then moved the topic to the risks of protectionism, asking the panelists, "Are we seeing a backlash of protectionism?" Klaus responded that he saw resurgence in protectionism, particularly in Europe and United States. Panelists suggested that strong presidential leadership could drive trade liberalization and that the current administration′s low approval ratings might be harmful to the U.S. trade policies. Klaus added on that the U.S. and other Western European countries had the additional burden of non-tariff barriers. Other barriers were external, with the rest of world viewing globalization as the spread of Americanism.

The panel concluded with a short discussion of China, which Rubenstein described as a "huge growth market." He said that despite the risks of Chinese negotiations, investors in China should be prepared to go there for long durations and work with local partners in order to take advantage of the opportunities for profit, concluding that China′s main focus is not to make the United States richer.

William Anderson, from National Intelligence Council, looked at risks according to three aspects: importance, likelihood and timing. His greatest worries included avian flu and the risk of a terrorist attack. Gen. Wesley Clark agreed that biological threat was a major concern for the United States, as was the nuclear potential in the Middle East. U.S. involvement in Iraq signals an unstable equilibrium, he said, and it is hard to tell how long it will last.

Knowing how to manage one's portfolio in emerging countries under all kinds of risks is important, said George Hoguet of State Street Global Advisors, adding that the financial market is an efficient aggregator of information. The expectation of risks is absorbed by the market and reflected in prices or other indicators. However, extra attention should be drawn to the shape of the distribution of those risks, i.e., the probability of the risks. He pointed out risks that he considers particularly noteworthy: the high oil price that may slow down the world economic growth, the potential disorder associated with the global imbalances and the current housing market in the United States, which many believe to be a huge bubble.

Marc Miles of The Heritage Foundation expressed his concern over Eastern Europe. Many Eastern European countries, he said, have low flat tax rate and are implementing large-scale tax cuts, which put competitive pressure on the rest of Europe. The same pressure exists in Latin America, but he added that he remains optimistic about the U.S. ability to adjust to such pressures. What he would worry about instead, he concluded, is the possibility of inflation in near future. Not only has the price of oil been rising sharply, but so have gold and other commodity prices. That is a strong signal of an inflation risk, he warned.

As the session drew to a close, panelists discussed India and China, where large segments of the population earn just under a dollar a day. Miles said he believed that low wages were due to the inadequate economic freedom in those countries. The remedy is not rich countries giving money to poor countries, he said, but that poor countries should open their markets and give more opportunities to their people, such as liberalizing people's access to capital markets.

Brian Sullivan from Bloomberg TV interviewed Pickens in front of a crowd of 100-plus on topics ranging from oil supplies and alternative energy sources to President Bush′s plans to ease energy prices. Pickens, who has been in the energy and investing businesses for decades, provided a glimpse of the vast knowledge and insight that have made him so successful in these fields.

Key projections from Pickens included oil reaching $80 per barrel before falling to $60 (if that happens at all); growth in nuclear power generation in the United States; a resurgence of coal; a downward revision of world oil inventory estimates; and increasing oil prices until oil consumption falls below the current supply level of 85 billion barrels per day.

Bullish on many alternative forms of energy, Pickens believes ethanol, natural gas and nuclear energy will become more economical and play a larger role in U.S. energy consumption. Pickens himself is in the business of selling natural gas as fuel to waste-management firms and other operators of transportation fleets.

Just prior to Pickens' presentation, President George W. Bush announced a plan to address and control fuel prices. Pickens took a skeptical view of the likelihood that Congress would act upon such a plan. He also related some of his own discussions with government officials concerned with the energy prices facing consumers, as well as the gasoline taxes Pickens himself recommends. Pickens compared U.S. gasoline prices to the much higher prices found in Europe as support for such a plan.

As far as his favorite potential investment areas: coal and Canadian oil sands top his list of interesting ideas.

Myron Scholes, a Nobel laureate known for his work in valuing options, began the panel by noting that many financial innovations result from major economic shocks. This idea drew widespread agreement from the panelists, who noted that one recent shock, Hurricane Katrina, has demonstrated the need for many new types of financial products.

One area of development, said Lewis Ranieri, is for private insurance for catastrophic events like hurricanes. As private insurers debated whether hurricane or flood insurance should cover Katrina's damages, and government agencies responded slowly, many small and medium-sized businesses collapsed because they did not receive the bridge financing required to survive. Financial innovations like the securitization of tax credits for low-income housing development could further improve the pace of the rebuilding effort, noted Yago.

Another source of financial innovation is regulatory change. Richard Kauffman of Goldman, Sachs & Co. shared that the first Basel Accord, which provided a regulatory framework for bank reserves, had the unanticipated consequence of widespread securitization. The second Basel Accord, if passed, would allow banks to allocate capital according to internal risk models rather than external rules, and has the promise of spurring further innovations to mitigate risk and manage a portfolio of assets. Building on these comments, Ranieri noted that the second Basel Accord has been stalled for nine years because of concerns over the widespread innovation and change it may unleash.

Many of the most celebrated financial innovations have been in the area of risk management and hedging, and corporate activities to manage financial risk were a source of much discussion. Panelist Michael Milken shared his concern that many industrial operating companies, like General Motors, have largely become financial companies with their vast financing activities and pension plans.

"We need to move industrial operating companies back to operating companies," Milken said, by unloading their financial businesses to companies better suited to managing the risks of these portfolios. One important innovation to improve the management of pension plans and other financial portfolios, noted Kauffman, is a liability management industry. Asset managers are evaluated according to equity market performance, but pension and other liabilities may not be tied to the same indicators as the assets that support them. In the discussion of corporate risk management and hedging activities, the panelists also expressed concern that the market may not be rewarding companies for hedging their risks, even though such actions may increase the return on invested capital. Kauffman noted that hedge funds, which focus on the return on invested capital, may be changing this market dynamic and rewarding risk-reduction activities. As Scholes and others responded positively to the question of corporate hedging activities, Milken cautioned that hedging activities were not worthwhile unless corporate managers were qualified to understand and evaluate their risks.

Myron Scholes also noted that financial innovation would be supported and encouraged by a better corporate accounting system. The current GAAP accounting system, he said, "makes no economic sense" because it does not reflect the innovations that have taken place. Pension plans and hedging activities are not accounted for on corporate balance sheets. By keeping these off the balance sheets, their perceived importance is diminished. Such an antiquated system, says Milken, encourages rash decisions by managers with little understanding of their risk.

From new accounting systems to new insurance products, the financial innovations session was filled with exciting ideas. These new ideas have the potential to unlock and create value, just as option markets, high-yield debt and the securitization of mortgages created value and generated economic growth over the past 30 years.

In response to an audience question, the panelists pointed to the opportunities that the upcoming Beijing Olympics represent, and again emphasized that in order to take advantage of those opportunities, companies will need to adjust their strategies and products to the Chinese market.

The panelists have different backgrounds and histories, but all seemed to find the challenge of entrepreneurship in China′s emerging market "addictive," as Fredy Bush of Xinhua Finance described it. In addition, all seemed energized by the changes they have seen in China in recent years. Edward Tian of China Netcom described China as "hungry to be modernized," and others agreed that China is increasingly governed by a more uniform set of nationwide rules and regulations, which will improve the ability of companies to work in all regions. There was also a consensus that the capital market in China is overheated, and that there is more money available than there are entrepreneurs to take advantage of it.

Moderator Kenneth Morse of MIT brought up the issue of the shortage of professionally trained managers in China, and Tian agreed that he considers this a major challenge. Although there is no lack of opportunity for workers, he said, managers in China need more training in budgetary issues, performance review and management.

An audience member pointed out that a related but opposite issue is not just attracting, but retaining workers, especially since many of them may want to become independent entrepreneurs. The panelists agreed that offering stock options is a good way to tie employees more closely to a company, but they also agreed that people work for more than money. Bush pointed out that employees need to feel that their voices are heard and that the company is going somewhere. At the same time, Morse mentioned that employee spin-offs of new companies is not necessarily a bad thing, since these spin-offs are the drivers of growth and innovation.

The panelists offered advice throughout the session to those interested in entering the Chinese market: Believe in your company and have patience; be willing to take risks; be open to doing business with the government; find the right business partners and/or local managers; and do enough research to understand the local environment.

Ambassador Engin Ansay, consul general of Turkey in Los Angeles, admitted that, though the traditional job of a diplomat encompasses many sectors, he sees his main task as business development. He characterized Turkey as a "rising star" and said the country is in a unique position in the international community: It is the only secular, democratic nation with a majority Islamic population. He also highlighted a number of statistics that should encourage foreign direct investment: the increase in per capita income and employment, for example, as well as the reduction in inflation rates and the sustained growth of the economy over the past decade.

Selim Uyar of the Permak, Uyar and Remag Group of Companies said that privatization as a driving force is making Turkey more attractive to investors. He also underscored the large pool of human capital available in Turkey and, as a result, a growing need for houses, jobs and other services.

Kaya Tuncer of the ESBAS Company highlighted the importance of "process" and suggested that the government "upgrade the mentality of the bureaucracy" to make structures in Turkey more investor-friendly. Tuncer also recommended the establishment of better laws and regulations for the FDI market.

Turan Itil, a physician and founder of the TMI Alzheimer's Centers Inc., highlighted the huge opportunities for investments in the health sector and predicted that the largest portion of future foreign direct investment in Turkey will be in this area. The basis for this prediction, he said, is the inadequate capacity of the current hospital system, and an insufficient number of hospital beds and doctors. The country′s growing population will only lead to greater demand on the health-care system.

Moderator Mustafa Sagun of Principal Global Investors raised the issue of the country's eastern and southeastern regions, both which have been neglected during Turkey's economic progress. While acknowledging that these areas are certainly lagging behind the rest of Turkey, Ambassador Ansay brought up the GAP Project, which is building 19 dams and/or power stations in these regions, with the aim of increasing agricultural output by 50 percent. Additionally, both the ambassador and Uyar suggested that eastern Turkey has great potential to become a tourist attraction, with its mountains and natural beauty. Political conflict, specifically with neighboring Armenia, was presented as the greatest obstacle to the development of the regions.

The panelists were all optimistic about the potential for investment in Turkey, in every sector described above, as well as other sectors not mentioned. Dr. Itil concluded the discussion in traditional Turkish fashion by bestowing a "gift" upon the audience, advising them to travel to Turkey for any future medical procedures, as he believes that foreign direct investment is increasing and making the level of service comparable to that in the United States, while providing that service at a fraction of the price.

Investing in entertainment has historically been a tricky proposition for investors wary of volatility and unpredictable returns. Yet in recent years, there has been a tremendous influx of new capital, new equity and financing innovations that are fueling programming ventures. Hollywood has restructured its corporate identity, hedge funds are partnering up with producers, and deals are becoming more creative.

At the beginning of the decade, after the stock market bubble burst, investors were looking for new industries and Hollywood was looking for new forms of capital. Fortunately for both, media companies were in the midst of a massive vertical integration, creating themselves into great corporate identities that not only produced movies but also owned networks, publishing companies and sports franchises.

It was the "corporatization" of Hollywood, as panelist Sanford Climan of Entertainment Media Ventures Inc. noted. And with that, media companies became easier to analyze for Wall Street. Panelist Aizaz Shaika of BNP Paribas, said the rise in transparency among media companies made the industry more attractive to investors.

Hollywood also finds itself with a new breed of partners is the form of hedge funds. From Batman to the Matrix, private equity funds are teaming up with producers to finance new films. Many studios are finding this to be a welcoming sign. As Climan put it, "the studio′s desire for long-term partnerships with financial players is a new phenomenon."

Despite the new investment levels, the entertainment industry is still a tough proposition. Panelist Roy Salter of The Salter Group described the difficulty to investing, from understanding the nomenclature to following the cash flow. If investors aren't diligent in their research, he said, they could have a flop on their hands. However, he added, these highly integrated and diversified conglomerates present many opportunities for creative deal making.

The panel agreed that there is a great future for this industry and that the percentage of consumer spending in likely to increase in the coming years. They cautioned that technology will further flatten the distribution channels with the introduction of push-button entertainment, where eventually all media will be "on demand." Furthermore, the definition of "Hollywood" and what it produces is likely to broaden. For example, communication is becoming more a part of entertainment. As Climan explained, if you're not on the phone for business, then that's a form of entertainment.

As the public sector has become increasingly unwilling or unable to fund these investments, private-sector project financing has often filled the void. And not surprisingly, infrastructure projects are becoming an important source of revenue for private companies. As Colleen Harkness of Global Growth Market Groups noted, the infrastructure division at GE now accounts for 35 percent of total revenues, and this percentage is expected to grow in coming years. As GE increases its efforts in these areas, she said, it is keeping in mind the lessons learned from prior efforts, including the importance of a strong local presence and of making targeted, small investments.

Although it is tempting to think of infrastructure as a developing world issue, Kevin Klowden of the Milken Institute was quick to point out that it is an issue for the developed world, as well. For example, Klowden explained that the infrastructure investment in California is far below the levels necessary to match economic growth and sustain the lifestyle that Californians are accustomed to. However, the private sector is often hesitant to provide project financing because of the stringency of environmental and other regulations and the challenges of complying with these policies.

Peter Rigby of Standard & Poor's echoed the significant impact of the political and regulatory environment on the attractiveness of a project finance opportunity. In addition, he said, he generally looks at a number of other factors, including the fundamentals of the technology, the quality of the construction contractors, the contract structure (e.g., debt structure and liquidity), the legal structure, whether the project is bankruptcy-removed from the parent, the counterparty risks and the underlying economics of the project.

David Rogers of the law firm Latham and Watkins reiterated the importance that the legal framework and structure can have on an investment. He cited the failure of merchant generators as a prime example: Deregulation left the companies with a "giant unhedged position" of capped revenues and unlimited exposure on the cost side, which combined with Enron to create a disaster.

All the panelists agreed that private-sector financing of infrastructure projects has tremendous potential to address many of the world's infrastructure needs. In fact, the model has worked surprisingly well, even in seemingly "dodgy" geopolitical environments. Nonetheless, the model is not a panacea, and many challenges remain. Human capital and the availability of skilled labor are often major constraints. And the project finance model works only when the economics do, which may not help address the infrastructure needs of the poorest of the poor. Finally, the country risks and potential for sovereign interference may make even economically feasible investments unattractive overall investments.

They agreed that the challenge for private project financiers, the investment community and governments will be to work together to address these issues.

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Bradley Belt of the Pension Benefit Guaranty Corp. started the session by exposing how the current system rewards companies for not properly funding their pension liabilities. He exposed some of the moral hazards that the implicit government guarantees create, such as the under-funding actually being a form of zero-interest borrowing on behalf of the company.

Frederic Brace of United Airlines shared his views on the inability of companies and unions to effectively manage pension funds. He proposed that employees use professional, private pension fund managers, instead of the current company-based system.

Jeremy Bulow, a professor at the Stanford Graduate School of Business, emphasized how the current system still allows companies to give out large future benefits without significant impact to their financial statements. He proposed that the first step to stop the problem from growing is to mandate that all new benefits must be fully funded.

Jonathan Rosenthal of Saybrook Capital criticized the current system for restructuring pension obligations, which basically require a company to reach an all-or-nothing deal with its pensioners. He also exposed the system's lack of information disclosure. Pensioners rarely know the funding status, level of risk or asset-allocation strategy of their funds, even though companies and unions do.

The panelists proposed different measures to address the problem, ranging from changing the regulatory treatment of pension funds to those of banks or insurance companies. They also proposed changes in accounting procedures so as to disclose to pensioners and investors a more accurate picture of their funding status.

Toffler elaborated on the non-monetary economy by using the example of education. How many people went to "computer schools," he asked rhetorically. Then he reflected on an individual′s first exposure to a TRS-80 computer from Radio Shack in the 1970s. After the individual had purchased the computer, taken it home and read the manual, it still seemed that there wasn't a whole lot new owner could do. Thus, individuals searched for the "computer gurus," who were in actuality "anyone who had bought it [the computer] a week earlier" because computer schools didn′t exist. People are educating each other all the time outside the confines of the established system, he said.

A key component of this non-money economy is the concept of the "prosumer," he explained. These people are both producer and consumer of goods and services. During the talk, Toffler elaborated on two key concepts in his model: outsourcing of non-monetary work and marketization and demarketization of non-money work.

Toffler believes in three types of jobs in one's life. First, there is the full-time job one goes to every day. Second, there is one's domestic job (e.g., washing dishes). Finally, there is the third job, the outsourced job. These jobs are the jobs the corporate world outsources to the consumer, such as Fed Ex making the consumer track his own package rather then having a customer representative perform the job. He does not claim that this type of outsourcing is a bad thing, but rather that it is excluded in the economic analysis since it′s a "job" that is non-monetary.

Many individuals contribute to the non-money economy. We see this every day where people work in their homes, have hobbies and volunteer. Toffler claimed that these jobs are constantly being brought into and out of the marketplace and cited the gaming industry, Famous Amos and Linux as examples of hobbies that are now in the money economy. In contrast, for cases of demarketization, he cited innovations like Napster and Skype, an Internet telephone company.

The session wrapped up with a series of question from the audience. Two of the most interesting questions were about the role of science and technology in the new model and a deeper question: "Is the non-monetary economy a new concept?" Toffler said he believes that science is under attack. When he was child, he said, scientists were heroes. But a different picture exists today. Furthermore, he said he worries what repercussions the lack of interest in science will have for the future. The role of a scientist, in his opinion, is to question life and society, and he noted that Noble Prizes are won by challenging and refuting prior truths. The critical analysis of life helps drive the economy, and without the questions, we would not be where we are today.

Finally, an audience member questioned whether the non-monetary economy is a new concept? During the Middle Ages, he said, there was little use of a monetary system. Toffler agreed with the comments but noted that he doesn't believe that history repeats itself. Things may have the same characteristics, but the environment in which these events happen matter. Even though terrorists existed in the past, the fact that terrorist could have weapons of mass destruction today changes the implications.

Although such rigidities persist in the corporate real estate market, new financial innovations are helping to unlock the value of these assets from the balance sheet. Thanks to new forms of insurance, several manufacturing firms now have greater real estate value than operational value. When AIG stepped into the market for environmental insurance, this made contaminated property attractive. Ten years ago, these contaminated properties were unattractive because the downside risk was too high, explained William Lindsay of Coast Capital Partners. Now that stop-loss insurance is available, these properties have potential market buyers.

The key to improving efficiency in the corporate real estate market may be to match firms' real estate needs with the needs of financial markets. Lindsay recommended that firms strip out the income flows from their real estate assets to try to make cash flow as predictable as possible. He said that predictable cash flow "is most important to financial markets."

Yet many firms have unique needs that would have difficulty following such a strategy. If the financial structuring behind a real estate asset becomes too sophisticated, it can impair the value of the asset. Whatley argued against layering too much "fancy stuff on top" because at the end of the day, the land serves a business purpose. Too many financial instruments added on top of an asset can reduce the flexibility of an asset. This can cost the firm dearly in the future if it cannot sell an asset because of the structure of the financing.

In addition to the financial structuring behind a real estate transaction, firms must also pay attention to the human capital considerations. For example, Whatley said, "If you put real estate in the wrong place and human capital does not want to go there, you lose that human capital." If the firm's employees do not want to relocate, then the firm must find new employees, which can be a huge cost consideration. Therefore, human capital must be part of any corporate real estate decision.

Not all the issues are business-related, however. Another major factor is regulation. Phil Cyburt of Cyburt Hall Holdings talked about the effects of Sarbanes-Oxley regulation on smaller companies that lack the basic infrastructure to face these regulatory "diversion costs." These regulations have distorting effects, argued Lindsay. He called it ironic when regulations designed to preserve liquidity have the perverse effect of making markets less functional.

Despite these new regulatory challenges, Lindsay predicted that the cost of capital for real estate will come down. He pointed out that many deals fail to materialize because of a lack of financing due to excessive risk. Current private equity investors are unwilling to hold large risks unless they can charge large premiums to cover the risks. But in the near future, private equity groups specializing in real estate will be going public. This will create blind pools of capital for private equity investments. The result will be "deeper markets" with less need for large-risk premiums because the risk will be pooled across a broader market.

However, Mexico has only had zero per-capita growth since 2000, with $20 billion in annual remittances coming from the United States. Additionally, every year between 300,000 and 500,000 Mexicans cross the northern border. But with a divided congress and the presidential election 10 weeks away, will the Mexican leadership be able to make reforms necessary to push the economy on a path to growth? With this introduction, moderator José Alberro of the Law and Economic Consulting Group led his panelists into a discussion of Mexico's future.

Carlos Bremer of Value Grupo Financiero thinks that the GDP in Mexico has the potential to grow at 5 percent or more, and mentions that Mexico is currently No. 1 in Latin America on the risk-vs.-return index. "Mexico has a base now for real development," he said, adding that "infrastructure and housing, if done in the right way, could be a big part of this growth." But to enable development, key reforms in energy and fiscal policy are required.

"I think the reforms are critically important," noted Thomas McLarty of Kissinger McLarty Associates, who also noted that a "a primary focus should be on the quality of life of Mexicans."

The current president, Vicente Fox, has a 68 percent approval rating among Mexicans, and Federico Sada Gonzalez of Vitro, S.A. de C.V said that "respect and recognition of the presidency is there." But with the top three presidential candidates each currently commanding nearly a third of the pre-election votes at the polls, it remains to be seen whether the country can mobilize behind the new president to support the necessary reforms. Sada Gonzalez noted that there is a strong division between the northern and southern regions of the country. Reconciling these political divisions after this tough election will be the job of the new president and will take strong leadership.

Mexico's development should also be of concern to its northern neighbor because the Hispanic population in the United States is growing prolifically and is having a significant effect on the political and social landscape. The question is not whether the United States and Mexico will become more integrated, but whether they will do so in a mature and productive way. "Its time to revisit NAFTA, and I think most of us agree on that," said McLarty. Bremer and Sada Gonzalez expressed the hope that Mexico will be able to take advantage of what they see now as a foundation for Mexico′s development.

Teresa Clarke, a vice president at Goldman, Sachs & CO. said she expects Africa's real growth to continue to compound at 4 percent annually. The growing African economy will continue to provide a positive environment for foreign direct investment, she stated, adding that in the past three years, Africa has attracted $26 billion in total foreign direct investment.

On the whole, foreign direct investment has primarily focused on the financial and cellular technology industries, with England being the largest provider of foreign direct investment, at $12 billion. The dollar-denominated return on these investments has been better than the returns in many developed countries around the world over the same period, Clarke said. African countries that have primarily contributed to above-average returns were Egypt, Nigeria, South Africa, Tunisia, Ghana, Botswana and Morocco.

Still, foreign direct investment in Africa is not without its risks. Harold Doley, an investment banker in Africa, identified the main pitfalls to investment performance as the shortage of good managerial leadership, prevalent corruption and the lack of a well-functioning legal system that enforces property rights.

Of the world's 30 least hospitable countries for investment, 14 are in Africa. Still, Doley said he remained positive on Africa because of its ability to deliver commodity inputs to China and India′s growing economies. China has invested $3.3 billion in Angola in order to secure a future source of oil, he said. And the flow of foreign direct investment into Africa's infrastructure from China and India will enhance Africa′s future growth prospects.

Venture capital activities have also increased in Africa. Rodney MacAlister of the African Development Foundation said he has been able to pool capital from African governments and persuade the U.S. government to make a dollar-for-dollar matching contribution for investment in African businesses. This venture capital pool has been able to grow because African companies have successfully returned capital back to the fund, which can then be used for future African investments. MacAlister said he thinks venture capital opportunities will continue to increase across the African continent as its infrastructure expands.

The United States has not been a large player in foreign direct investment of Africa in recent years. Stephen Hayes of the Corporate Council on Africa suggested that the United States has missed out on many investment opportunities on the continent because U.S. institutional investors are not willing to assume risk exposure of African countries. To remedy this problem he said, an institution such as CalPERS (the California Public Employees' Retirement System) needs to explore investments in Africa, rather than taking a passive role in an emerging market fund that has little exposure to the continent.

Overall, the panel expressed a strong positive outlook on Africa's future prospects and continued growth of 4 percent per annum. The majority of these gains are expected to come from Egypt, Nigeria, South Africa, Tunisia, Ghana, Botswana and Morocco, which are making progress to solve government corruption, low workforce education and undeveloped infrastructures. In the near future, the panel members agreed, Africa will further develop its consumer markets for technology goods and fuel the development of India and China.

On the question of whether the intelligence community had enough power in the pre-9/11 world to access information that could have prevented the attack, Estrich and Brown agreed that they did. Estrich stated that rather than being a problem of a lack of power, the failures of the intelligence community were simply the result of "foolish bureaucrats [being] foolish bureaucrats."

Prager, on the other hand, suggested that not only was the intelligence community impeded in its information-gathering capabilities before 9/11, but that the new powers granted to intelligence agencies through the Patriot Act do not seriously curtail the civil liberties of the American people. To support his claim, he presented an article from a July 2005 Los Angeles Times article showing that the actual number of cases in which the Patriot Act is used is extremely small.

Rollins, taking a political perspective, acknowledged that complications from the war on terrorism have seriously hurt President Bush, who faces the lowest approval ratings since President Nixon. Besides the weakening of the president, however, Rollins asserted that there are other serious problems facing the American people, specifically an ineffective Congress and a new and unpredictable enemy. In this time of crisis, Rollins asked, what should be the power and responsibility of the executive? Where are the checks and balances? How do we equip a man who is so weakened, but who must be prepared and empowered to deal with another, inevitable disaster, whether terrorist or natural?

Estrich declared that regardless of what powers the president needs to fight the war on terrorism, those powers must be regulated by the rule of law. She used the example of detainees at Guantanamo Bay, suggesting that while the president may be free to choose what sort of law should apply to those detainees (military, laws of war, etc.), some law must be applied. On this point, Estrich and Rollins were in agreement. Rollins asserted that Estrich′s words could have been made by a conservative rather than a liberal, and that the fundamental rules of the Constitution should not be forgotten in any discussion of executive power.

Greenfield left the audience with some important questions: Is this war on terrorism a real "war"? If so, why isn′t the American government or the American public behaving as though they are living in a state of war? Why are we so quick to complain about higher gas prices while fighting the most expensive war in American history? Where is the sacrifice that has been made by earlier generations during earlier periods of war?

Siegel, addressing the aging trends in demographics, posed two questions: "Who will produce the goods?" and "Who will buy the assets?" He argued that productivity and immigration alone would not be enough to prevent both the retirement age from rising dramatically and a large downturn in the asset market.

He suggested that a natural and healthy trend would be for younger nations, such the BRICs (Brazil, Russia, India and China), to provide the goods in exchange for assets in the developed world, i.e., maintaining or expanding the current account deficit and capital account surplus.

Milken emphasized the impact of technological development and deployment on wealth creation. He predicted that the deployment of financial technology on the developing world would unlock a large amount of dead capital and propel growth. He also argued for the importance of medical advances and their impact on the quality of life, longevity and wealth, estimating that the cure of cancer alone could add four years to U.S. life expectancy and $50 trillion to the current stock of wealth.

The debate evolved into a discussion of extended life expectancy, more specifically, the question of how long individuals would be willing to work before retiring. Siegel maintained that recent increases in life expectancy have not been followed by increases in the retirement age. Milken suggested that new technologies, such as distance learning, could lead to different types of work and extend the effective retirement age.

Both panelists were emphatic on the negative effects of protectionism to both the developed and the developing worlds. The free flow of capital, goods and ideas, they stated, would play an important role in balancing the different demographic trends.

The remarkable growth in India is undeniable, according to Karan Bhatia, the deputy U.S. trade representative. He pointed to the growth in trade markets and the changing attitudes of policy-makers and their approach to domestic markets and policies.

However, while there is liberalization and progress in select areas, change is missing in retail and financial services. Bhatia said that if changes are to happen in these areas, we must wait another five years to see them.

While having a democracy brings about many positive opportunities for India, Bhatia also suggested that a balance between the governments of India and China would be the ideal situation. For example, infrastructure changes occur rapidly in China, while India continues to be littered with poor-quality roads and airports. India also needs to find a way to deal with the bureaucratic processes, which have hindered growth.

Another challenge is that while business is growing, 700 million people are still in the rural sector. Bhatia said he does not see agriculture as India's future, due to its lack of efficiency, compared with the sector in other countries. He said he believes India will instead become a service-sector-based economy.

During the past 16 years, Harpal Randhawa of Sabre Capital Worldwide has seen three periods of growth in India, one of them being now. Domestic demand is up, he said, exports are up, and more private equity money is entering India at the ground level. And he believes things will continue this way for a while.

The best chance for sustainable growth, he argued, will occur if the government removes itself from business. Other roadblocks for growth include the lack of infrastructure and the fact that it is a high-cost economy. Because of these problems, Randhawa predicted, companies are likely to move away, frequently to China.

Growth will be slower in India than in China because of democracy, but growth-rate comparisons should adjust the numbers for value-add to get a truer sense of the changes occurring, said Randhawa. Large businesses that hope to enter India should be willing to tailor their offerings to the market, even though the Indian consumer is changing.

The government has done almost nothing while India has grown, said Joseph Sigelman of OfficeTiger LLC. As soon as things liberalize, money will flow in, he predicted. The population of India is 1.2 billion, and while there is much attrition and wage inflation, he still has 40 people applying for each open position in his company. Thirty-nine of these, he said, are not qualified educationally. Other panelists argued, however, that it was not a case of lack of education, but cultural differences and intimidation during the interview process. While India is likely to grow in the global scene, Sigelman pointed out that foreign direct investment needs to be selective and that companies should not forget that they still need manufacturing companies in order to employ unskilled laborers.

Likening India to the United States at the turn of the century, Ramesh Vangal of the Katra Group said there is great risk, but also great opportunity. While China is driven by FDI, India receives less than 5 percent, so the opportunity for foreign investment is good. Indians are entrepreneurial, and the domestic market is strong. Companies should go after markets and buy brands, move out of the big cities and invest in training and infrastructure.

While most of the panelists pointed out the weaknesses in the Indian infrastructure as a hindrance to growth, they all saw a positive future. Bhatia predicted that as long as the government is willing to adapt, in 15 years we will see the United States, China, and India as the large economic powers. Sigelman claimed that while democracy is slowing some aspects of growth, democracy will also enable India to surpass China.

The success of the Internet as an entertainment content platform has transformed the way traditional media companies think about reaching their users. Are the major media and entertainment corporations prepared for this change? A distinguished panel composed of leaders in the entertainment industry gathered to discuss this issue.

Jason Goldberg of Katalyst Films agreed that the future of programming is on the Internet and said he thinks that users do not want to be "served" content; they want to seek it out themselves. Viewer participation, interaction, choice and control themes continued throughout the discussion. Levinsohn noted that Fox is well positioned to reach audiences through nontraditional means with its recent acquisition of MySpace.com. Given the growing popularity of online social networking sites, Fox now can offer advertisers access to millions of people through the site.

However, access to online audiences is only part of the equation. It is just as critical, stressed Dwight Caines of Sony, to integrate traditional and emerging forms of content delivery into the same products. For example, The Da Vinci Code movie trailer contained a puzzle that led viewers to an Internet site, which then led them on a 24-hour online quest similar in spirit to the one featured in the movie. Similarly, Underworld 2 was marketed by releasing an online game where players were told that the movie would provide clues and cheat codes necessary to win the game.

Finally, Jim Bankoff of AOL said he is looking forward to positioning AOL as a content distribution platform for traditional media companies. He stated that many online users are interested not necessarily in creating content so much as personalizing and "contextualizing" it: tagging, rating and categorizing previously created content. However, in this scenario, piracy remains a concern, added Caines, as users share copyrighted materials on their personal sites. He stressed the importance of educating young people about the importance of intellectual property protection as the industry moves forward with delivering digital content.

The panelists represented the leaders in the hotel, office, retail and residential sectors of the U.S. real estate market. Sam Zell of Equity Office Group, David Simon of Simon Property Group, Stuart Miller of Lennar and Barry Sternlicht of Starwood Capital shared their views on the questions of real estate valuation, macroeconomics, international real estate markets and the capital markets.

The key question of real estate valuation provided ample opportunity for debate among the panelists. Although all four experts were optimistic about certain areas of the real estate markets, Sam Zell and Stuart Miller took a more bullish stance, with Barry Strenlicht and David Simon providing a more tempered view.

Miller looked to economic and population growth, as well as land scarcity in population centers to support his view of increasing land values in the future. Zell echoed this view of supply-and-demand factors, and pointed to the growth in liquidity turning to real estate to achieve yield objectives.

Sternlicht chimed in that "this is too bullish" and focused on increased leverage levels and the low cost of debt as hints of an overheated market. Simon agreed and added that retail properties, in particular, had benefited from high rents and high yields on development. He said he sees these results declining in the near term, as yields begin to approach the lower yields found in other sectors of the real estate markets.

All four panelists found technology to be an integral part of their operations, affecting either their marketing, production or both. Zell said that technological superiority provides a strong competitive advantage in his Mexican homebuilding business and that equity will continue to succeed in this market as long as such an advantage persists.

After a rousing discussion covering many key issues of the current markets, moderator Lewis Feldman of Goodwin Procter LLP asked the question many audience members had been waiting for: "What is your favorite type of real estate asset now?" Zell chose Brazil; Miller chose scarce land in growing U.S. coastal markets; Sternlicht favored European properties, such as hotels; and Simon liked strong super-regional malls.

The group explored four imperatives for alternative energy sources. First, the dynamics of supply and (high) demand mean that the current scenario is unsustainable. "There's no question from a supply-and-demand perspective that demand is increasing by extraordinary rates," observed Daniel Weiss of Angelino Group LLC. Current oil prices are an obvious symptom of this issue, he said.

Second, the aging infrastructure of U.S. energy production and distribution means that the present system must be updated, likely in favor of renewable sources. As an example of the outdated infrastructure, panelists mentioned the limited oil refining capacity the United States. Indeed, the last refinery built in the United States was in the 1970s; it is unlikely that new ones will be built. The New York blackout of 2003 was cited as a symptom of the problem.

Panelists agreed that the environmental issues, particularly global warming associated with traditional energy, sourcing are a widespread and enduring concern.

Finally, the panel members discussed the geopolitical incentives for alternative energy. The growing American consensus is that the United States should be less dependent on foreign oil, given increasingly complicated politics of doing business with the oil-exporting countries and the concerns regarding national security.

While the reasons for establishing alternative energy sources are clear, the industry is just beginning to develop. Alternative energy includes wind, solar, geothermal, biofuel, clean coal and fuel cells, among others. At present, alternative energy constitutes just 6 percent of U.S. energy consumption; globally, this total is 12 percent to 13 percent. Overall, panelists expect this must and will increase dramatically in the coming years.

The U.S. government's role in this changing landscape will be significant, the panelists agreed. In order to foster development of the industry, the government should set standards for alternative energy sourcing (such as the required ethanol content in gasoline); provide financial (loan) guarantees for the more expensive infrastructure needs regarding alternative energy development; and continue existing tax credits and incentives (such as the $0.51 per gallon incentive for ethanol). As the industry develops over the long run, the government′s role in the industry is expected to dissipate.

Overall, panelists were optimistic about their growth expectations for alternative energy. As Weiss noted, "Real companies with real products and real profits are solving real problems [already]." Moreover, they said that cross-border learning would be essential to developing a vibrant alternative energy industry. Brazil, for example, was cited as an international leader. Alan MacDiarmid of the University of Pennsylvania commented that "we can learn a great deal from other companies and partnerships." Another panelist, Neil Koehler of Pacific Ethanol Inc., concurred that this global approach was necessary, stating that "In the future, there will be no one form of alternative energy that is suitable for any one country."

On the specific subject of the panel, innovation,, the group agreed that the long-term effect could be to decrease capital market returns to individual investors. As Matthew Bishop of The Economist explained, innovation in the new economy may increasingly pay dividends and returns to consumers in the form of lower prices rather than to the producers (and their investors through the public equity markets).

Scott Minerd of Guggenheim Partners agreed with this assessment, pointing to the example of the telecommunications bubble. While many criticized the significant investments in fiber optic cables as wasteful, consumers have benefited in the form of lower prices. In addition, Jeremy Siegel of the University of Pennsylvania's Wharton School noted that venture capitalists and early investors may benefit more significantly in the future, as less and less value is left for public investors in the secondary markets. Regardless of the distribution, Minerd argued, the relative re-pricing of inputs like fuel will drive continued innovation as long as tax rates are sufficiently low to make it profitable.

The panelists also engaged in a lengthy, passionate discussion about the state of the equity and bond markets. Siegel argued that stocks are currently the only major asset class priced at or near fair market value; real estate and bonds are overpriced. Minerd agreed; stocks, he said, are "relatively cheap" and at worst "fairly valued." He speculated that it might be due to investor memories of the bursting of the tech bubble, the fact that greater fortunes could be made in real estate in recent years and the tendency for investors to overweight historical trends.

Regardless of what one thinks in particular about the state of the equity markets, Arthur Laffer of Laffer Associates emphasized that the U.S. economy today is the best economy in his lifetime, and perhaps one of the strongest the world has ever seen. Policy clearly drives markets, and Laffer said he was optimistic that none of the four "killers of capital markets" -- higher taxes, bad monetary policy, bad regulatory policy or protectionist trade tariffs -- will interfere with the tremendous growth.

Though Minerd agreed broadly with this optimism, he expressed concern that the increasingly unequal distribution of wealth will engender unwise knee-jerk reactions that may compromise the economy′s health. In addition, he warned, it is important to take into account the potential chain reactions set off by events that occur around the world and which are too often underestimated by investors.

Lew Solmon of the Milken Family Foundation's Teacher Advancement Program (TAP) began by stressing the importance of teacher quality and the need to build systems to create and reward excellent teachers. A dollar spent on a teacher quality initiative has 10 times the impact of a dollar spent to reduce class sizes, he said, and teachers respond well to programs that encourage them to build careers and reward them for improving their teaching practice. He encouraged policy-makers to emulate systems designed by TAP that link strong professional development programs with performance pay initiatives.

Nina Rees of Knowledge Universe, stressed the importance of innovation and competition in America′s public schools. Charter schools, she said, serve as important "laboratories for school innovation," and their best practices can be replicated across their home school districts. She also shared data showing that districts with charter school competition have seen improved performance in their non-charter district schools, suggesting that competition can have a strong positive impact on student performance.

Ron Packard of K12 Inc. showed that innovative curricula and information technology could also have a strong impact on student achievement. K12 online education programs have shown strong performance in a variety of state and district implementations across the country. Packard attributes this success to an online curriculum that is easily and constantly improved and updated to reflect student and teacher feedback, creating high degrees of student engagement in the online format.

After these presentations, California Secretary of Education Alan Bersin was asked to discuss educational governance and local control of school districts. Bersin noted that the 20th century has seen increasing centralization of government institutions, and that the No Child Left Behind Act of 2001 was the first attempt to centralize the public schools over this period. There has been a further push, most recently in Los Angeles, for mayoral control in large cities. While Bersin stressed that mayoral control was not a panacea, it has the potential benefits of centralizing accountability and decision making.

Finally, former U.S. Secretary of Education Rod Paige was asked to share his thoughts on the improvements needed in the education system. After speaking on a variety of issues, Paige said that "we have not exhibited the political will to do what we need to do to fix our schools." This is partly because the public ahs not expressed clearly enough to its representatives and other leaders its dissatisfaction with school performance. It was clear from this panel that there are many great innovations and exciting reforms that can improve America's public schools, but that their implementation will require increased community and political engagement.

Richard Cotton of NBC then shared his expertise on the distribution and licensing of videos, stating that major networks have made major investments in content and will always have a need to monetize it. Darcy Antonellis of Warner Bros. followed up with her view that in today′s market, major networks and sites like YouTube will move toward partnerships.

Kneale then posed the question, "Is posting something on YouTube stealing?" Attorney Kirkman responded, saying that "the responsibility was ultimately with the user who posted," and Cotton broke in with a resounding "Yes!"

Kneale then stirred up the topic of "the big guys wanting it both ways," getting free promotion, while still wanting people to pay for their content. The panelists responded that distribution of "free" content was like marketing in any other industry. Kneale then asked Hurley about MTV′s response to posting its videos without permission on YouTube, to which Hurley responded that he had recently done a deal with MTV to promote videos on the network′s site. He concluded by saying, "People today want bite-sized pieces of content."

Kneale then shifted to the issue of the Internet being a place where "you can put anything anywhere," and asked how the media industry was prepared to deal with this. Cotton responded that this development, while risky, gave the industry the "ability to reach consumers in a new way," and reinforced Antonellis' earlier ideas about exploring partnerships in order to take advantage of the new technological advances. However, he placed a decided emphasis on the fact that the online piracy is not a viable in the long run.

The conversation then shifted to the fact that broadband has become more prevalent, with 60 percent of broadband focused on peer-to-peer activity, most of which is illegal. As the panelists deliberated on how to deal with the legal implications, Cotton spotlighted the music industry as the "poster child of where no one wants to go," and emphasized that "the best way to prevent copyright infringement is to build it into the technology." Kneale followed by saying that the video industry has shown itself to be much more receptive by integration with sites such as YouTube, leading up to his next question: "How good a job is the industry of embracing the new changes?"

Antonellis responded that the major studios were very receptive to using the Internet and embracing the new technology as part of the distribution platform, as long as they made up proper business rules with the sale of content. She also talked about initiatives to have movie trailers and promotional materials on the Warner Bros, web sites. Kneale asked the panelists if they thought the industry was running behind in its modes of video distribution. Hurley responded, saying "they are in a sense, playing catch-up."

The panelists also discussed the future of content, who would provide it and who would pay for it. Cotton discussed NBC′s new "broadband studio," focusing on short, focused content based on existing network content. Kneale then asked if the panelists thought that any type of user-generated content would be able to achieve the success of a sitcom like "Friends." Hurley thought that it would be highly possible, while Cotton disagreed, saying that the factors going into producing that type of content were too complex, and that networks would be the primary source of highly produced viewer content.

The second topic, who would pay for content, covered the two main avenues of revenue: subscription services and advertising, with Kneale making the point that networks have let us know how much value it is for them to be showing an ad to a customer (for example, that it costs two dollars for a consumer to watch a show without advertisements). The panel concluded with the general consensus that the way advertising is made is changing, and that viewers have more choices about the content that they view.

Although it is the larger multinational firms that get a lot of press, "it′s the smaller ones that can benefit and often drive" this growth, said moderator Rafael Pastor of Vistage International. Small to mid-size businesses (SMBs, which are characterized as having 500 or fewer employees) are not only a major force in the domestic economy, but they are rapidly expanding their global reach. Today in the United States, SMBs represent 99 percent of employers, 70 percent of net new jobs, 51 percent of private-sector workers and 50 percent of GDP. And between 1994 and 2004, the number of SMBs exporting from the United States quadrupled. Of the SMBs that are global, 38 percent are involved in exporting, 17 percent are involved in importing, 17 percent are involved in outsourcing, and 29 percent have external offices.

So what are the advantages and disadvantages of SMBs, compared to the large multinationals? SMBs generally have less capital than, and lack the huge marketing muscle that larger firms have, said Oren Harari of the University of San Francisco Graduate School of Business. But they do have "nimbleness, agility, and speed," he added, which allows them to take advantage of lucrative but fleeting opportunities. "The most successful players have their eyes tuned way out there on the horizon," he continued, something that big companies may only be able to give lip-service to.

However, in the beginning stages, SMBs will "have to learn the hard lessons (that big companies already learned)" warned Scott Jarus of Cognition Inc., and if they want to survive, they need to be able to "pick themselves up and continue racing forward."

Another notable advantage of SMBs is their ability to have an intense regional focus. They can begin by developing a deep understanding of a particular region and then use this understanding to expand in intelligent directions. Larger multinationals with overseas headquarters and ties to a strong corporate culture may find it harder to develop the same focus.

According to a Vistage International survey of chief executives of global businesses operating in Canada, Malaysia, the United Kingdom and the United States, staffing was thought to be the No. 1 challenge facing their businesses. Since business operations and strategies are increasingly global, having a staff that is globally aware and multilingual has become critically important. But when it comes to the worldly education of young generations in the United States, said Harari, "we do an atrocious job." The panelists agreed that, especially in SMBs where the number of employees may be small, staffing must be an especially conscious part of company strategy.

In this wave of globalization, there are not only opportunities for U.S. firms to expand abroad, but there are also opportunities for foreign firms to come to the United States.

"Globalization is a two-way street ... they′re going to be coming at us too," said Pastor, who asked the panelists what advice they would give U.S. firms who traditionally have not had a global focus. "Don′t be complacent ... you cannot afford to be," warned Harari, adding that "you cannot assume a steady-state management." Firms must focus on the value proposition to customers and cannot assume that market positioning and branding will last without innovation and maintenance. Mary O′Hara-Devereaux of Global Foresight said firms must understand "the first-, second-and third-order effects of China, India, Vietnam, the Philippines" on their businesses, as the participation of these nations in the global economy increases.

Why go global? What with expansive and diverse markets of goods, services and labor, any firm may find opportunities for cutting costs and increasing revenues in both the short and long term. According to Dan Barnett of Vistage International, "the strategic reason to go global is growth."

Yet even though the WTO has made progress, the Doha Round faces many obstacles.

The United States has led off the Doha Round by making an ambitious offer to reduce its agricultural export subsidies to other WTO member countries. This offer has been met with great skepticism from European member countries. Deputy U.S. Trade Representative Karan Bahtia said she believes that European skepticism has been caused by political pressure on its leaders, thereby resulting in a protectionist attitude of its agricultural industry.

To reach an agreement by July of 2006 and prevent a potential impasse, Paula Stern of The Stern Group feels the United States must use services as a central negotiating tool. She believes services are a better focal point for negotiation by the United States because that issue contains the bulk dollar value of the potential Doha Round agreement. The primary industry sectors that include services exchanged between WTO member countries are telecommunications and financial services.

Another obstacle facing the Doha agreement has been caused by U.S. unwillingness to reshape its current policy regarding steel dumping. Asian WTO member countries have been unwilling to negotiate serious agricultural reform of their markets until the United States changes its stance on the steel industry. Still, Greg Rushford, editor of The Rushford Report, sees the biggest dilemma to an agreement in the lack of a bipartisan support in the U.S. Congress. Still, in WTO previous rounds of negotiations, differences are not resolved until very late in the negotiating process.

In order to move toward a Doha Round agreement, the panel agreed that substantial political leadership must spark the progress and follow through on promises. In order to do that, WTO member countries must take action that coincides with the basic premise that free trade benefits its consumers more than the resulting costs of it workers.

Furthermore, the group stated, member countries must recognize that when another country with a competitive advantage provides goods or services to them, this also allows them to free up labor from a non-efficient use and apply it toward a sector in which they have a competitive advantage, which ultimately results in more goods and services produced for the world′s consumption.

While some industries related to a country's national defense may not be negotiable, the panel concluded, many opportunities remain for progress in the Doha Round and future WTO negotiations.

Sheika Al Farsi of the Omani Centre stated that Middle Eastern countries need to institute economic reforms and economic freedom in order to generate the millions of jobs necessary to employ the surge of workers they will need to accommodate as their extremely young populations age.

One of the keys to economic freedom is an efficient capital market. Maryam Al-Hashar of the Capital Market Authority in Oman discussed the development of the Omani Stock Market, which today contains 142 companies with a market cap in excess of $15 billion. Hani Sari-El Din from the Capital Market Authority in Egypt discussed the Egyptian Stock Market. This market was one of the best-performing markets in the world last year, rising 160 percent. This was due in large part to a very strong macro-economic environment in Egypt. GDP growth increased to 5.1 percent last year, inflation dropped from 17.3 percent to 5.2 percent, and foreign direct investment increased strongly.

Neveen El-Tahri from ABN Amro then discussed Egypt.s performance from the point of view of a private market investor. She noted that Egypt.s capital markets had been developing since the peace agreement with Israel in 1979. Neveen also complimented Egypt′s Central Bank head for doing an excellent job directing Egypt′s macroeconomic performance. One extremely interesting observation she noted was that many Egyptian nationals living overseas are beginning to return home to work and invest. She noted that this is similar to what is occurring in China, and has been a significant factor in China′s economic success.

Robert Bush of Istithmar discussed his company's mandate to seek attractive investment returns around the globe. Robert noted that a key when investing in emerging markets is to find trustworthy partners. He talked about the difficulties in dealing with opaque or nebulous regulatory environments in some developing nations, and felt that partnering with people one trusts can help mitigate regulatory risk. He also responded to a question about the outcry over DP World′s attempt to manage ports in the United States, noting that while he was surprised over the outcry, it would not stop him or other investors from the Middle East from looking around the globe for investment opportunities.

The panel concluded with a brief discussion of the impact of terrorism on Middle Eastern capital markets. This is an area of primary concern for many investors considering opportunities in the Middle East. The panelists noted that following previous terrorist attacks in Egypt, investment interest among institutional investors actually increased as they sought out potential bargains. In the event of a severe terrorist attack or a sustained outbreak of minor terror attacks, there would probably be a halt in the progress of the development of Middle Eastern capital markets. Absent such attacks though, the group agreed, it is expected that capital market development will continue.

All three distinguished scientists agreed that global warming was a real phenomenon. The year 2005 was the warmest of the last 150 years, and there has been a considerable increase in global surface temperatures, particularly in the Arctic region. Human activity has been instrumental in creating these effects, with increasing levels of atmospheric pollutants and carbon dioxide levels as a result of fossil fuel use and deforestation. Chu impressed the crowd with his clear explanation of increasing Arctic surface temperatures, and many were surprised to learn that non-carbon dioxide pollutants have increased temperatures by making Arctic ice dirty. This dirty ice is less reflective, increasing the amount of light absorbed by the polar ice caps. If Arctic ice melts and causes a change in ocean currents, said Rowland, it will "take over a thousand years to reverse the effects," which will include widespread changes in global temperature patterns.

Global warming may have a far-reaching impact on the global water supply, another of the Earth′s most pressing problems. While there is a tremendous supply of water on the planet, most of this is saltwater, which cannot immediately be used for irrigation or human consumption. Current desalination processes are too energy-intensive to be relied upon, forcing humans to improve water conservation. But global warming, said Chu, has the potential to impact the Earth's freshwater storage capacity. Most of the world′s freshwater systems are fed by the natural storage capacity of mountain snow and glacial ice. Should higher temperatures cause these to disappear, the state of California and other places throughout the world could face tremendous water shortages.

Alan MacDiarmid noted that he believes the world′s energy crisis to be the greatest scientific problem today. All the energy we use, he said, fundamentally comes from the sun′s energy. Through photosynthesis, plants and trees convert the sun's energy to our other forms of energy. With this in mind, he said he intends to spend the upcoming years trying to answer the question of whether the plants and plant wastes in the United States can efficiently generate enough ethanol to fully replace gasoline in automobiles. If so, this will reduce U.S. dependence on gasoline and global warming.

Chu offered a final cautionary note on global warming when he said that "the warmest period in the Earth's history was followed by the greatest mass extinction in human history." Scientists will play an important role in informing public policy and driving the technological innovations that will prevent our extinction and allow humankind to continue to thrive.

Some health improvements are quite simple. For example, Susan Trimbo of GNC talked about the health benefits of taking Vitamin D and fish. Such daily supplements are a big industry, with $20 billion in annual pill sales. Trimbo noted that 35 percent to 45 percent of Americans take a daily vitamin supplement, and when she polled the audience, she found that more half the listeners had taken a vitamin supplement that day. This above-average participation rate was not too surprising; affluent and educated people tend to be better informed and take better care of their health, she said.

But other Americans are jumping on this healthy nutrition bandwagon, too. In the past, people indulged in foods high in fat and sugar. But recently, said Brian Cornell of Safeway Inc., "organic has become much more of a mainstream item." Foods in high fat and sugar are not where Safeway sees growth potential. Rather, the five fastest-growing food categories in Safeway stores include organic fruit and juice, fresh juice, berries, fresh-cut fruit and packaged salads. And for those consumers who are unwilling to give up their favorite junk foods, grocery stores are now selling "portion-control packs." These 100-calorie packs of snack food are probably the fastest-growing segment in the packaged-foods sector of the grocery market, he said.

Cornell said he found it encouraging that "people are making smarter choices" at the grocery stores and retail food stores. Yet he stressed the importance of three variables when addressing the consumer: simplicity, convenience and taste.

One small startup firm, Eaturna LLC, has risen to this challenge. Eaturna strives to offer healthier, better-tasting, according to its chairman, Robert Fell, adding that, "You're not going to change the eating habits of most Americans." Therefore, the challenge is "to find food that people will like."

Fell argued that there has been "too much emphasis on science and diets." He said food should be fun. With the slogan, "love food, love life," Eaturna has set its goal to become the "Starbucks of the prepared food market."

What was a major theme for many of conference panels was, in fact, the entire focus of this session, summed up by panelist Richard Sandor of the Chicago Climate Exchange with the succinct phrase, "You can do good and do well."

In this session, the panelists fleshed out this proposition in very concrete (or perhaps carbon) terms, demonstrating not only the success of their own firms, both in terms of emissions control and financial gain, but also suggested several ways in which market forces are providing powerful incentives for potentially limitless growth in this direction for businesses in all lines and across all borders.

Representing leaders in industry, finance and the rapidly developing climate exchange market, each panelist had hopeful insight to provide, based on his own experience on how saving the planet is not only possible, but profitable.

Beginning with the time-honored assumption that "as goes GM, so goes the United States," a mere nod in the direction of GM's current predicament provided the backdrop for the urgency with which leaders in the business community are turning toward green solutions in general, and to carbon asset markets, in particular. For the non-believers, Sandor pointed out that not long ago, the commoditization of debt was regarded as impossible. Now we have the commoditization of pollution.

Sandor explained that the general trajectory of government regulation was moving from no controls to what he characterized as the "one size fits all" controls of the 1970s and to the 1990 Clean Air Act, which for the first time targeted one environmental problem (acid rain) and one pollutant, sulfur dioxide (SO2). The subsequent success the act in dramatically lowering SO2 emissions led, even if only as an indirect consequence, to the establishment of opportunities for new financial markets, ultimately manifested in the Chicago Climate Exchange and later the European Climate Exchange.

Neil Eckert of the European Climate Exchange predicted a $2.3 trillion carbon market by 2012 but asserted that the liquidity required to foster continued entry from new sectors is dependent upon cap-and-trade legislation. He described the myriad opportunities for investment that caps provide to businesses seeking to meet emissions requirements and, in turn, trade carbon points, ranging from the energy needs of small businesses to the infrastructure needs of developing countries.

Sandor added to this that financial performance of publicly traded companies has been shown by market analysts to be influenced to a very real extent by their eco-performance, based on consumer preference. Tipping his hat to the increasingly popular theme of financial transparency, Sandor said "... in other words, now is not a good time to be a misogynist, homophobic, racist polluter in the world market."

Each panelist, when asked why he became involved in carbon trading, credited Sandor as both the inspiration and motivation, which would seem to go a long way toward emphasizing the importance of leadership and human capital in addressing the environmental problems facing the world today. Beyond their collective endorsement of Sandor's ideas, two reasons for involvement in this market were cited repeatedly: the first being necessity (cap), the second being opportunity (trade).

In the case of DuPont Co., according to Edward Mongan, the company′s director of energy and the environment, initial interest in reducing emissions stemmed directly from the Clean Air Act and the increased awareness in the early 1990s of the dangers of greenhouse gases. The realization that this could have potentially disastrous financial repercussions on DuPont's particular line prompted immediate action long before the company saw potential for financial growth through carbon trading -- which it eventually did, a point not to be overlooked.

In the first instance, however, merely in an attempt to meet tightening government regulations beginning with the Clean Air Act, DuPont enacted policies that reduced its output of greenhouse gases from 90 million metric tonnes in 1990 to roughly 25 million metric tonnes in 2003.

It also bears mentioning, said Mongan, that during the period from 1999 to the present, DuPont's emissions have remained relatively flat, but that production has increased by more than 30 percent. This would appear to imply increased efficiency in production, even in excess of what the figures on total emissions reflect, perhaps providing the emissions points that have propelled DuPont into a prominent position in the emissions market. Beyond the initial need to fall into line with government caps, the potential for revenue generation via emissions credit trading was a huge incentive, not only for DuPont's involvement in this market, but for its continued effort to decrease emissions levels.

Echoing Edwin Mongan's sentiments, Bill Marcus of Chicago Calyon Financial cited the sheer enormity of the market itself as his company's primary motivation for participation. As he explained, a certain level of liquidity in any given market automatically attracts other players to the field, regardless of their level of concern about the environment. By his estimation, the brokerage community's involvement in the carbon asset market has reached that point in its parabolic curve where it is poised to explode, with potential to become perhaps the largest financial market in history within the next 50 years.

Other ideas that were addressed on the subject of opportunities and challenges presented by a brand new asset class (such as carbon) included the creation of new bodies of experts who can analyze and study the role of such variables as weather, policy, new consumer bases, geographic borders and education on the development of the market and its efficacy, not only in financial terms but also in human and environmental terms. Increased attention from academia was called for in producing knowledge, especially with regard to the developing world, and Sandor announced that as of the previous week, the Chicago Climate Exchange had added its first Chinese company to the membership.

In response to a question from the audience about how to convince businesses to open carbon accounts -- in this case, based upon a disappointing meeting with a major player in the entertainment world -- Sandor and the other panelists suggested two strategies, one negative, the other positive.

It is indeed odd, Sandor pointed out, that for all of their lip service to environmental causes, there are currently no major Hollywood studios with carbon asset accounts, an example, he said, of what they call in Chicago a case of "all hat, no cattle."

Mongan suggested that the first thing would be to attract a given company's attention to its own carbon footprint. Running those numbers, which is not yet a standard practice, is frequently enough of an eye-opener to motivate a board of directors to move in a greener direction, especially in light of the likelihood of stricter government regulations.

Sandor added that along with risks posed by government intervention, there is also the potential for financial risk in the form of a class-action lawsuit from the effects of pollution, and in turn for related negative publicity. In the case of the particular Hollywood giant in question, he said, any connection between its emissions and associated health crises in children could be its undoing.

On the positive side, he added, the incentive for financial gain and the potential to be in the entertainment world what DuPont is in the chemical world, i.e., the leader, could prove to be the most powerful motivator.

Whether altruistic government regulation or profit-motivated innovation (or flexible and creative combinations of the two) actually has the potential to save the planet remains to be seen. One thing is apparent, however, and it is that potential exists beyond what might have been conceivable to most as little as five years ago. This panel not only demonstrated the enormous degree of change already occurring, but the ever-increasing opportunity for the business community as a whole to join this movement and increase its momentum.

Yet the panelists in this session also noted the complicated calculations the United States and the international community must make in determining how to help the Palestinian people while withholding aid from their Hamas-led government.

The group largely agreed that the recent election of Hamas represented a protest vote against the corruption and lack of development under Fatah. But Hamas, they also noted, will never be a real negotiating partner for Israel. In fact, there was a consensus that Hamas is likely to fail within the next six months, and none of the speakers saw any possibility that Hamas might alter its ideology.

As Steven Spiegel, a professor at UCLA, explained, the real question is whether that failure will lead to civil war or to stability. Hiba Husseini of Husseini & Husseini, however, maintained that the Palestinians do not see many real alternatives to the Hamas government. She described herself as a moderate who believes in a two-state solution and emphasized that the Palestinians need to find a "third way," and will need support to do so.

Israeli Brigadier General Eival Gilady outlined the lessons both sides learned from the unilateral Israeli withdrawal from Gaza, explaining that he believed Israel had to "act unilaterally in order to jump-start the road map." As the panelists revealed during the rest of the session, however, there does not seem to be much hope for the road map in the immediate future. Although many saw President Mahmoud Abbas as a moderate genuinely committed to working with the Israelis, Spiegel pointed out that given Abbas′s failure to deliver while Fatah was in power, it seems unlikely that he will succeed under Hamas.

Spiegel outlined a set of eight options for the United States in dealing with the situation, but added that he did not see much hope of success in any of them. For him, the most viable option seemed to be relying on the Israelis to handle the problem; however, he also noted the dangers of ignoring the Palestinians and the effects of continued poverty and violence on the rest of the region. Gilady expressed support for Israeli unilateralism as a temporary path out of the current situation, and explained that while Israeli public opinion has shifted dramatically in favor of a two-state solution, Palestinian public opinion has not moved in the same direction.

Not all of the panelists agreed that Israeli unilateralism is necessarily the best solution. Husseini observed that her commute to work, which should take 15 minutes, generally lasts an hour and a half because of checkpoints, and that this restricted movement around the country is clearly hurting commerce. Yet Gilady responded that despite his dislike of checkpoints, Israeli guards had stopped a suicide bomber at a checkpoint only the day before.

William Samuels, founder of Blue Tiger Democrats, saw this as a positive change for candidates because the money received was from clean sources, with no strings attached.

While financial contributions increased dramatically from supporters to the Democratic Party during the 2004 election, civic (time) contributions at the local level were lacking. Samuels noted that over the course of his career working with the Democratic Party, financial contributions have continued to outpace the time contributions of its members. In order to address this problem, he has enacted an initiative through the Blue Tiger Democrats organization to complete civic activities in communities between presidential elections. The purpose of these activities is to reconnect local Democratic Party members with their communities. Samuels said he recognizes that money alone is not the answer for improving the Democratic Party.

Another trend that has continued across presidential elections has been the need to fund television advertising. In the 2004 presidential election, the Democrats and Republicans together spent $1.6 billion for television advertising. William Simon Jr. of William E. Simon & Sons, said television ads have disenfranchised many young, independent voters from the political process, and that the system of using the ads needs to be reevaluated. The Internet is an underutilized alternative, he maintained, and one that should be used in the future to deliver the Democrats′ platform to voters in a more positive form.

Another issue facing the Democratic Party is the distribution of money received from donors. In recent years, at the national level, the party has retained the bulk of donations at the expense of the local Democratic Party chapters.

Still, Mark Brewer of the Michigan Democratic Party said that the party faces a larger problem created by the McCain-Feingold campaign finance bill. The McCain-Feingold bill has caused large campaign donors to funnel their money through independent organizations, instead of the Democratic Party. This has led to a deeply fractionalized Democratic Party because these independent organizations are usually focused on single issues, and if the mainstream Democratic Party platform does not take the same view on that issue, tension is created among the Democratic voting base.

The panel said that civic activities at the local level must be more strongly developed, the Internet must be further utilized to reach voters, and independent organizations receiving large donor funds must better coalesce with the party′s mainstream. If these problems can be fixed, they concluded, the Democratic Party can expect a different result in the upcoming presidential election.

Chu began by reviewing the world's use of energy over time. By 2025, he predicted, the world will use three times the energy it did in1970. Given that we chiefly depend upon fossil fuels, this implies greater carbon dioxide in the atmosphere. Carbon dioxide lasts a long time; even if we stopped adding to it, the world would continue warming. At twice the carbon dioxide levels of pre-industrial times, the world climate would shift by several degrees, growing hotter in the Northern Hemisphere, colder in the Southern Hemisphere.

Chu cautioned the audience to not underestimate a few degrees: for example, he said, 8 degrees Celsius separates today's average temperatures from that of the last ice age. As the temperature rises, glaciers melt, reflecting less heat back into space and speeding the warming. Although the warmer weather should encourage more plant life, which would remove more carbon dioxide, even the most generous models do not predict much relief. Our agriculture in the Northern Hemisphere would be threatened by this climate change; already California farmers can no longer depend upon water from the Sierra Nevada Mountains.

Chu discussed the possibility of storing carbon dioxide underground, out of the atmosphere. Oil drillers are already using carbon dioxide to push out more oil. South Dakota actually exports carbon dioxide to Canada for this purpose. Unfortunately, if carbon dioxide leaks out, it can be deadly, and oil companies have been reluctant to monitor study how this leakage happens.

This growth in carbon dioxide as an asset is fueled by a dwindling resource: oil. The United States is the wealthiest country in the world and consumes the most energy per capita. Until 1970, the United States was a net exporter of oil; now it imports 60 percent of its oil. China seems poised to follow in the same path; it is now importing 50 percent of its oil and will have to increase to 75 percent soon. Although no one knows with certainty, predictions of a peak of oil production have been continually made. Chu said he doubts whether the world will run out of oil in the foreseeable future; current drilling methods only recover 30 percent to 40 percent of the oil available.

Chu said he believes we have two parallel paths for our energy needs: conservation and the development of new, cleaner energy. Although he said that the free market is the most nimble way to accomplish technology gains, he acknowledged that there are certain limitations, such as externalities (prices do not capture damage from pollution), and that free markets only promote local optimization in time or geography (a shortage of fish fuels more fishing). He used the example of refrigerators to show how government regulation can help the free market. Refrigerators have steadily gone up in size but have used continually less energy since the mid-1970s, when the federal government started requiring stricter energy guidelines. The real price for refrigerators has gone down, as well. This is an important example, since 40 percent of all energy is used to heat or cool, he said.

On the "supply side," Chu considered new fuel sources, such as coal, fusion, fission, wind, photocells and biomass. There seems to be at least 200 (perhaps a 1,000) years left of coal, he noted. Unfortunately, coal puts out even more emissions than oil. Chu dismissed fusion as not being a major player for the rest of this century, at least. Fission is marred by the waste and nuclear proliferation issues. Even if Yucca Mountain finally opens for nuclear waste, he said, it would be filled by 2010. Recycling the fuel reduces waste by a factor of 10, but involves plutonium, which can be "weaponized," creating a security risk. Wind is also a strong possibility as a new energy source; its cost is within 20 percent of commercial viability.

Chu seemed to feel that using biomass as an alternative fuel source was perhaps the strongest possibility. He noted that the recent history of agriculture has allowed us to feed more people on less land. In fact, he said, the federal government pays many farmers to not grow crops. New trade agreements will make it less likely that the United States can sell the heavily subsidized crops on the world market, making it ideal for biomass energy, such as conversion to ethanol.

Sandor discussed his reactions as an economist, saying that he found Chu's words sound. He said the question on pricing externalities was very interesting. For example, the United States passed a cap on sulfur emissions in response to the problem of acid rain. His organization, the Chicago Climate Exchange, manages the trading of the permits that allow the sulfur polluting. This, he said, set up price signals that encouraged scrubbers in smokestacks, the switch to low-sulfur coal and the switch to gas.

Both Chu and Sandor agreed there were large gains to be made in non-fossil fuel energy sources, particularly biomass. Sandor quoted a member of OPEC who said, "The Stone Age didn't end because they ran out of stones." Similarly, both men said they were optimistic that the world would shift to other energy sources well before our oil runs out.