Sunday, April 22, 2007
12:00 pm - 6:00 pm
1:00 pm - 2:15 pm
Many voices have chimed in on what′s needed to fix our schools. This panel goes straight to the source: leading educators who face the challenges and make decisions impacting K-12 classrooms on a daily basis. What do they consider to be the most powerful reforms to spur student achievement, particularly among high-risk student populations? New forms of professional development, a national curriculum in math and science, technology and literacy initiatives, and other options will be discussed. Is it possible to successfully implement any school reform without a focus on teacher quality? How can teachers and administrators help to attract high-caliber talent to the teaching profession, and then create an environment in which such talent will thrive? What role do teacher and principal accountability, advancement opportunities, site-based professional development, and performance pay play in motivating and retaining quality educators? Where do you see the private sector fitting into the public school mix?
Moderators
Lowell Milken, Chairman and Co-Founder, Milken Family Foundation; Co-Founder, Knowledge Universe Education LLC
Speakers
Susan Couch, Executive Master Teacher, Louisiana Teacher Advancement Program
Eleanor Gaines, Teacher, Grayhawk Elementary School
Christopher Ormiston, Teacher, Boerne High School
Nader Twal, Smaller Learning Community Coordinator, Western Association of Schools and Colleges Facilitator, Millikan High School
Wanda Watkins, Principal, Thurgood Marshall Elementary School, Richardson Independent School District, Texas
2:30 pm - 3:45 pm
In 2001, the federal government passed the No Child Left Behind (NCLB) Act which made a clear statement that public education needed to change dramatically in ways that improve student achievement and reduce achievement gaps. Under NCLB, schools have been held accountable for their students' progress. For the first time, there are consequences for failure to do so. Further, NCLB calls for a highly qualified teacher in every classroom; however, there is controversy over whether the federal definition of highly qualified is sufficient to ensure highly effective teachers in schools. Despite original and to some extent continuing bipartisan support in Congress, there are clear differences in opinion regarding the law. Some feel that the reach of NCLB impinges upon state and local control over education, while others feel that the legislation does not go far enough if we want our students to compete in the global economy. Still others support NCLB but argue that insufficient funds have been allocated to support the mandated policies.
Moderators
Lewis Solmon, President, National Institute for Excellence in Teaching; Senior Advisor, Board Member, Milken Family Foundation
Speakers
Arne Duncan, CEO, Chicago Public Schools
Amanda Farris, Deputy Assistant Secretary for Policy and Strategic Initiatives, U.S. Department of Education Office of Elementary and Secondary Education
Nancy Grasmick, State Superintendent of Schools, Maryland Department of Education
Nina Rees, Senior Vice President, Strategic Initiatives, Knowledge Universe Education LLC
6:30 pm - 7:15 pm
This session is by "invitation only" and is limited to invited guests. If you are interested in attending, please send an e-mail request to jmeehan@milkeninstitute.org.
7:30 pm - 10:00 pm
This session is by "invitation only" and is limited to invited guests. If you are interested in attending, please send an e-mail request to jmeehan@milkeninstitute.org.

The gala Milken Educator Awards Dinner and Ceremonies honor some of America's finest teachers, principals and specialists from across 48 states and the District of Columbia. Dubbed the "Oscars of Teaching" by Teacher Magazine, the Awards celebrate educators before an audience of leaders from business, government, academia and foundations, culminating in the presentation of unrestricted financial prizes of $25,000 to each exemplary educator. This year marks the 20th anniversary of the nation's largest, most prestigious teacher recognition program.

Monday, April 23, 2007
6:30 am - 7:00 pm
6:30 am - 8:25 am
7:00 am - 8:25 am
This session is by "invitation only" and is limited to invited guests. If you are interested in attending, please send an e-mail request to jmeehan@milkeninstitute.org.
7:00 am - 8:25 am
During the Second War with Lebanon in the summer of 2006, northern Israel in particular bore the brunt of devastation from missile strikes. But even before the war, explained panelist Carl Kaplan of the Koret Israel Economic Development Funds, the region has been economically disadvantaged due to a "lack of credit and lack of infrastructure," and an over-dependence on tourism.

Northern Israel requires a large influx of capital to construct badly needed infrastructure critical to better integrating the region into Israel's economy, the panelists agreed. Additionally, economic development is needed to support and attract new jobs and growth, while stemming the out-migration that is draining the region of its most important resource, human capital. Moderated by David Pollock of Bear Stearns & Co., the session focused on discussing solutions to these problems in the form of innovative financing programs.

Los Angeles-based Israeli Consul General Ehud Danoch discussed the "enormous potential in the north" and showcased the many technology companies thriving in the region. He stressed that despite past insecurity, Israel's economy is booming and has attracted significant amounts of foreign direct investment. Setting the context for the remainder of the session, he explained how Israel has been facing pressures of a growing population and economy, and the need to better integrate the north into the rest of the country.

Ron Dermer Israeli Embassy in Washington, D.C., expanded on Danoch's statements and explained that the apparent contradiction of war and political instability beside extraordinary economic growth was due the fact that "Israel has gotten its fiscal house in order" and benefits from productive and innovative human capital. Over the past several years, he said, the Israeli government has engaged in "reverse tax-and-spend" fiscal policies, dramatically cutting taxes and reducing spending while adopting policies to privatize state-owned enterprises, foster competition and facilitate more public-private partnerships. He highlighted the nation′s stable monetary policy; adding that since Alan Greenspan left the Federal Reserve, "Israel has the best-led central bank in the world."

Israeli companies and citizens hold more patents than India and Russia combined, he stated, and the country enjoys the highest venture capital per capita in the world. "We can compete," Dermer stated, within Israel and around the world. Unfortunately, there has been inadequate investment in critical infrastructure in the north, and there is a need to leverage VC and philanthropy to provide innovative financing for infrastructure investment and provide credit to small businesses.

Glenn Yago of the Milken Institute, noted that while 58 percent of Israel′s exports are from the technology sector, that figure represents only 7 percent of employment. Yago led a recent Milken Institute effort to identify innovative finance solutions to aid economic recovery and development in northern Israel and discussed the method of using "innovation labs," collaborative sessions that bring together financial experts and representatives of relevant foundations. Some possible solutions include: development of a bond authority for infrastructure and public-private projects; expansion of Koret Israel Economic Development Funds for small-business development; development of a northern Israel small-business collateralized loan obligation; and the use of the Chicago Climate Exchange offsets program to raise additional financing.

Kaplan discussed his program, supported by the Koret Family Foundation, to leverage bank financing with philanthropic donations. This program is seen as a model for Israel that many would like to see expanded significantly. The program operates a revolving loan fund that makes incentive loans, ranging from $10,000 to $500,000 to small businesses. According to Kaplan, the program has funded 1,200 loans, supporting more than 20,000 jobs.

Yaron Kestenbaum of the Israel Infrastructure Fund noted that Israel′s infrastructure is not keeping pace with its economic growth and that the nation is facing an electricity power deficit. The Israel Infrastructure Fund is looking to bring additional private capital into Israel to help finance large infrastructure projects and has so far attracted over $100 million. Promoting the fund as market-grade investment, Kestenbaum touted anticipated returns in the double digits with relatively low risk because of the government's support of these projects and innovative financing programs.

One example of the potential success of the programs is Israel's Highway 6, a privately funded toll-road project, financed by 10 percent equity and private debt. One reason for the project's success was a government guarantee for 80 percent of demand. Travel demand is near anticipated levels, and the debt was commoditized and has generated profits for the original investors.

Pollock summarized the session, noting that potential venture investors and philanthropies are likely to embrace the proposed solutions because the conditions in Israel are very favorable. The government is willing and supportive, there is highly educated and innovative available human capital, and there are existing programs already in place.

Moderators
David Pollock, Senior Managing Director, Bear Stearns & Co. Inc.
Speakers
Ehud Danoch, Consul General, Consulate General of Israel, Los Angeles
Ron Dermer, Minister, Economic Affairs, Embassy of Israel, Washington, D.C.
Carl Kaplan, Managing Director, Koret Israel Economic Development Funds
Yaron Kestenbaum, CEO, Israel Infrastructure Fund
Glenn Yago, Director, Capital Studies, Milken Institute
7:00 am - 8:25 am
"We believe our country is facing some unprecedented challenges," said George Boggs, president and CEO of the American Association of Community Colleges. "Sputnik was a ... visible challenge to our country. We responded by improving our educational systems. We're living in a more challenging time than we were then, but there has been no visible sign like Sputnik [to catalyze system change]."

Data from the U.S. Department of Labor currently projects a deficit of 14 million skilled workers by 2010, especially in the health-care and teaching professions, and among technicians and crafts workers. While this situation seems dire, a solution to this problem may already exist in the form of small, adaptable, creative educational institutions: community colleges.

"Community colleges are an American contribution to education," Boggs observed. These local institutions enroll 46 percent of students in higher education and possess the most diverse student bodies in this sector. Originally founded as technical colleges or junior colleges, they were designed to serve the underprivileged and academically under-prepared. Today they strive to reduce the equity gap for minorities and low-income individuals, who have traditionally experienced limited access to and success in higher education.

However, to continue to serve the best interest of its students, this sector must now reassess its relevance to the corporate world and respond to the needs of business. This need for curriculum change is driven by two factors: the increased fluidity of the current work force, and the need for relevant training for the future work force. While workers were once relatively immobile throughout their careers, today they may require retraining as they change fields.

The national profile indicates that from 2000 to 2010, positions requiring an associate′s degree will increase by 32 percent; the educational distribution projected for the 2010 "creative work force" indicates that nearly 45 percent of the work force will need at least an associate's degree. However, many adults currently employed do not possess the required credentials to succeed in this new environment. The community college is seen as the only institution capable of responding to the impending crisis, through its flexibility and ability to train many students around the country.

However, as Ted Sanders, chairman of the Cardean Learning Group, explained, "We have a very leaky pipeline for education in our country." He added that businesses can't find the skills they need in the U.S and are increasingly turning to skilled overseas workers. He also noted that because businesses operate across intra- and international borders, standardized training measures are necessary to ensure consistent performance. These don't exit yet; community colleges offer different programs or training with virtually no coordination between curricula.

Meanwhile, community colleges face significant challenges as they try to change traditional course offerings -- and state regulations. "In terms of effecting change," said Ding-Jo Currie, president of Coastline Community College, "the voice of the corporate/business industry is what [community college leaders] are seeking as a partner to make change at the national and state level." With funding drawn mainly from state coffers, community colleges are often bound by stringent regulations. And because they are often local and independent, they have little influence within the state and federal government. However, partnerships with business could increase that influence. Additionally, direct funding from businesses for new training programs could help spur a shift from the current curriculum silos to teamwork, critical thinking skills and other skills essential for success in today's corporate environment.

The next step is to foster dialogue between community colleges, business, regional accrediting bodies and government, said Joel Kurtzman, senior advisor to Knowledge Universe and a senior fellow at the Milken Institute. "Business has real needs in terms of a high-quality work force and a flexible way in which the work force can be trained, not just once in their careers, but multiple times." There are rigidities on both sides, he said, both through job descriptions in business, and through regulations on course offerings. The bridge is mutual communication and flexibility between two groups, which is necessary to "provide the human capital, and provide the opportunity to improve that human capital."

In closing, Sanders emphasized the synergy between the community college and business as the key to improving workforce education and training, reiterating that "a nation's wealth is driven today by its human capital, its people and the way to change the human capital quotient of a nation is through education writ large."

This seminar marked the second meeting of leaders from business and community colleges to establish a working partnership through the Corporate America Program; the first occurred in January of this year and initiated a dialogue between these sectors.

8:30 am - 10:00 am
Sen. John Kerry kicked off the first major session of Global Conference with an introduction to the issue of climate change. "This moment on Earth represents a number of critical tipping points," he said. First, if current practices do not soon change, global warming will pose an existential threat to life. Second, enough people in Washington now share this opinion so that wide-reaching legislation is expected to emerge within several years.

Kerry laid out the scientific case for climate change and presented the challenge now facing the United States; then he and his fellow panelists offered their views on how the federal government and business community can effectively meet the challenge of global warming. He noted that 928 peer-reviewed scientific studies have supported the claim that human-induced CO2 and other gas emissions have increased the greenhouse effect on the Earth's atmosphere. Not a single study, he said, has refuted this claim. "Anybody who approaches this from a logical or common-sense basis has to come to the judgment of 'Hey, that makes sense,'" he said.

Kerry relayed his most recent conversation with NASA scientist Jim Hansen, who believes that the Earth cannot tolerate more than a 2-centigrade increase in temperature without major environmental disaster. Hansen indicated that there is now a 10-year window of opportunity to prevent this disaster from occurring.

The senator put forward several policies the federal government should take to avoid global warming and advocated especially an immediate ban on the construction of new pulverized coal power plants that do not capture or sequester carbon. He stressed the importance of developing alternative and clean fuel sources. At the center of Kerry's vision is a market-based cap-and-trade policy, which he alleged would be the most efficient solution for accomplishing the government's carbon emissions reduction goals because it would create a framework allowing for private innovation. He also stressed that without a major policy shift toward carbon emissions reductions, the United States will lack the moral legitimacy to negotiate with other major polluters.

Kerry commended recent efforts by companies like Wal-Mart and other businesses in using efficient and clean energy technology. Still, these efforts are not sufficient; the business community can demand energy-efficient products, construct energy-efficient buildings and use their influence on the political process.

When the discussion turned to recent legislative wrangling over carbon emissions in Washington, the panelists offered slightly different perspectives of what a bill should look like. Jon Anda, president of the Environmental Markets Network, emphasized the importance of bringing in developing nations and holding down cost volatility for new technologies that will be needed to transform to a low-emissions economy.

Dan Braun of Stark Investments discussed the need for adequate price signaling for the alternative technology sector. Richard Saines of Baker & McKenzie stressed the importance of enacting the bill quickly and designing it to serve as a platform for linking up with the rest of the world. Martin Whittaker of MissionPoint Capital Partners said that the bill must heed the lessons from Europe's experience, link with international markets, offer credit for early acting firms and gain industry and regulatory buy-in.

The panel discussed two points of contention now overtaking Congress. Sen. Kerry and the other panelists dismissed a current proposal by Sen. Bingaman of New Mexico, mandating a safety valve that would allow the government to stabilize the carbon trading market by issuing new permits when prices reached a certain level. The panel agreed that such a program would stifle innovation and did not address the immediacy of the problem of global warming. "To have an escape hatch to save an economy that won't be there is absurd," said Kerry.

The panelists dismissed using a carbon tax as an alternative to a cap-and-trade policy, but they noted the importance of using tax policy as an additional tool in achieving ultimate emissions reduction goals. Braun explained that the urgent need for immediate emissions reductions makes a tax a less attractive option than a quota because policymakers cannot be sure that the tax will lead to the targeted emissions reductions. Valuable time will be lost as the government adjusts the tax to desired levels. While agreeing with Braun's point, Saines stressed the need to adjust tax codes in conjunction with the cap and trade program to provide incentives for reduction in emissions.

Concluding the session, the panelists and Sen. Kerry agreed that far-reaching legislation designed to combat climate change was coming to the United States soon, but most likely not until a new administration is in the White House.

Moderators
David Sandalow, Energy and Environment Scholar, Foreign Policy Studies, Brookings Institution
Introduction By
John Kerry, U.S. Senator (D-MA)
Speakers
Jon Anda, President, Environmental Markets Network
Daniel Braun, Director of Global Environmental Finance, Stark Investments
Richard Saines, Partner, Baker & McKenzie LLP
Martin Whittaker, Director, MissionPoint Capital Partners
8:30 am - 10:00 am
"A problem is nothing but an opportunity looking for a solution." Quoting her late husband, Sen. John Heinz, Theresa Heinz Kerry captured the aggressive and altruistic mindset driving numerous philanthropic foundations and individuals to do their part in solving today′s biggest -- and smallest -- societal ills.

Entrepreneurial philanthropy, said Michael Milken, is about "individuals having the opportunity to change the paradigm." And beyond just individuals, "foundations historically have been the most critical institutions in advancing society," said Carl Schramm of the Ewing Marion Kauffman Foundation. Whether the issue is the environment, health care, education or the arts, entrepreneurial philanthropists and foundations are continually looking for better, quicker, and more effective ways to aid their cause.

In 1999 researchers at Boston College predicted that over time more than $41 trillion of charitable donations would come from World War II and baby-boomer generations. Although that number seems massive, the total is nearing the mark eight years later. Today charitable giving exceeds $260 billion a year in the United States. The largest portion of this sum has come from wealthy, generous Americans. Individuals have donated more than four times than the amount of foundations and corporations -- and fewer than 10,000 families have contributed more than 20 percent of all donations.

Don Randel of the Andrew W. Mellon Foundation captured the most important theme of the panel: individuals do make the difference. Government institutions, burdened with bureaucratic, budgetary and personnel restrictions, seemingly have not been able to fully address and solve numerous social issues, such as inadequate public education or unaffordable health-care coverage. And Milken noted that institutionalized structures are difficult to manage. As a result, many needs are left for individuals and foundations with greater physical and financial freedom. For example, Schramm noted that the Ewing Marion Kauffman Foundation helped construct 85 new schools in just two years by taking a business approach and starting a REIT and building bloc fund to do so. One would be hard-pressed to find this pace of achievement from any school district functioning on its own.

The panel touched on the clear dichotomy between massive, slow, cash-strapped government and small, fast, cash-rich individuals. Yet members also emphasized that the key to entrepreneurial philanthropy is finding how to best utilize and spend large sums of money to enact substantial change and, more important, not to do harm. The key to this, as Randel said, is investing in the right people and supporting the best ideas. Milken supported this sentiment, arguing that "the role of entrepreneurial philanthropy is to identify the individuals who have the ability to make these things happen." Beyond this, he said, it is the role of philanthropic foundations and individuals to accelerate the speed at which other institutions, such as government and universities, research and solve problems. As foundations and individuals unveil and discover solutions, larger institutions can copy them to effect more change.

"Entrepreneurial philanthropy isn′t about inventing new things to cure," said Randel, adding that "it′s about finding more effective ways to get people to think about things that matter in life itself." Some "things" that the panelists have been concerned with are the arts, an area the Andrew W. Mellon Foundation continues to support; health care, an issue the Milken Institute has addressed; and education, a subject in which the Heinz Family Philanthropies invests.

Panelists emphasized the important reality that entrepreneurial philanthropy has in effect transformed charity into a business. Simply put, philanthropy is a business, and -- as any entrepreneur or business person would -- individuals and foundations continually search for innovative ways to make their services more effective for and responsive. To do this, charitable giving has increasingly become more targeted, either toward a specific issue, such as cancer (Milken), or a geographic area, like Pittsburgh (Heinz). In addition, philanthropy is now being put to the same tests as business, in terms of accountability, transparency, metrics of success and return on investment.

The biggest challenge to the effectiveness and longevity of entrepreneurial philanthropy, however, is leverage and scale, and each panelist was asked why the presence of widespread philanthropy was, for the most part, only found in the United States. Citing the presence of tax credits for charitable giving, Theresa Heinz Kerry noted that philanthropy "is the great strength of America." Schramm agreed, noting philanthropy is what is "unique about America′s foundations and its essence," shaped by a history of exceptionalism.

Milken pushed the conversation a step further, arguing that the real key to the future of entrepreneurial philanthropy will be to persuade other countries to jump on board. "Can we see the international community doing similar things that we see in the U.S.?" he asked. The panelists agree that the opportunity exists; with the 1,000 richest people in the world controlling more than $3.5 trillion in assets, the ability of a few rich individuals to enact significant changes is clear, and with issues such as education or health care becoming more interdependent and international, it is likely -- and necessary -- that philanthropists around the world collaborate.

Moderators
Betsy Zeidman, Director, Center for Emerging Domestic Markets, Research Fellow, Milken Institute
Speakers
Teresa Heinz Kerry, Chairman, The Heinz Family Philanthropies
Michael Milken, Chairman, Milken Institute; Chairman, FasterCures / The Center for Accelerating Medical Solutions
Don Randel, President, Andrew W. Mellon Foundation
Carl Schramm, President and CEO, Ewing Marion Kauffman Foundation
10:15 am - 11:30 am
Hedge funds have exhibited tremendous growth, quintupling to $2 trillion just over the past decade, while the size of capital markets only doubled over the same period. Hedge funds now account for one-third of the turnover of U.S. equities and for a much larger share in the trading of exotic instruments like derivatives. Many people expect the industry to reach $2.5 trillion to $3 trillion by 2010.

Not surprisingly, the Securities and Exchange Commission has maintained an interest in regulating the sector, but attempts have been overturned by an appellate court. In Europe, meanwhile, hedge funds are getting negative attention and press -- The Financial Times, for example, has published articles with such titles as "The Cancer of Hedge Funds" -- and are subject to some limitations.

Moderator Jonathan Spalter of Public Insight asked panelists whether "the industry needs more red tape."

Paul Roth of Schulte Roth & Zabel listed several possible reasons for regulating hedge funds: growth; systemic risk; the impact on trading markets; investor protection; and potential fraud. While systemic risk is an important issue, he argued, it should be the concern of the Federal Reserve, not SEC. Investor protection would be the most salient motivation for regulation among all possible reasons.

The discussion revolved around leverage and investor protection. Marc Lasry of Avenue Capital Group noted that the reason for the failures of LTCM and Amaranth was excessive leverage. LTCM was 50 times leveraged when it went down, he noted. Today most of the market operates at two to three times leverage, which means the industry is much less risky than it is popularly perceived. It should also be remembered, he said, that investors themselves can be levered, hinting at possible implications of regulation at the client level --"it all comes down to leverage." If the leverage is in the order of 10 times, the fund can easily go out of business. "If it′s in the order of two or three," he said, "that′s good."

Robert Matza of GoldenTree Asset Management, noted that the overall leverage in the market today is just a fraction of the level a decade ago and that not all funds exploit all forms of leverage. For instance, Matza's firm does not use prime brokerage leverage. Paul Roth agreed and added that today there are more tools at the disposal of managers and clients to deal with issues of leverage.

In terms of investor protection, Lasry emphasized that there is "already self-policing in the industry." If a fund does not perform well, it will have a difficult time keeping and attracting investors. Matza drew attention to the monitoring and disciplining roles brokerage firms play in the industry. Prime brokerages keep hedge fund assets, see their composition and performance, and can issue calls whenever necessary. He argued that a great deal of protection is built into the system in this fashion. Lasry expanded this line, providing the example of Bear Stearns, which will ask for more capital "at the smallest downtick." And rating agencies are watching like a hawk as part of the checks and balances in the system.

One needs to distinguish between funds investing in equities and those investing in bonds, advised Roth. A more interesting and more necessary distinction must be made between institutional hedge funds, around 350 in number, and those consisting of "two guys in a garage," he said. The latter are much more numerous, in the order of 10,000-12,000, and are not nearly as sophisticated as the former.

The new SEC rule of 2004 requiring hedge fund registration was overturned by the D.C. Circuit Court in 2006. The next step by the SEC would not involve an appeal, but an approach using alternative ways of regulating. Roth suggested that the target could be counterparty regulation addressing the ways investors and others do business with hedge funds.

Lasry noted that it's a fairly simple procedure to register with the SEC, and that sizable and reputable clients like CALpers value registration Thus, it's in the interest of serious fund managers to register. Jon Lukomnik of Sinclair Capital added that "it's great that pension funds are coming in since they discipline the market."

Lukomnik also said that the "idea that hedge funds are separate from the rest of the market is fallacious." He is especially bothered by "techniques to divorce economic interest from ownership interest." In his opinion, the whole basis of corporate governance is that marriage. He emphasized that a hedge fund is simply a legal construct -- but that the legal side has not caught up with the development of investment instruments.

There is bipartisan consensus in the Senate, but not the House, for regulation, explained Roth, adding that what happens at the state level remains a wildcard.

The panel concluded with general agreement that the industry will continue to "be attacked" and will eventually undergo regulation, not the least because of political motivations. The question remains, though, whether that regulation will be "smart."

Moderators
Jonathan Spalter, Chairman and CEO, Public Insight LP
Speakers
Marc Lasry, Founder and Managing Partner, Avenue Capital Group
Jon Lukomnik, Managing Partner, Sinclair Capital LLC
Robert Matza, Partner and President, GoldenTree Asset Management LP
Paul Roth, Partner, Schulte Roth & Zabel LLP
10:15 am - 11:30 am
Moderator Lowell Milken, chairman and co-founder of the Milken Family Foundation, opened the session with the question "What must be done to ensure that young people from every strata of our society are provided a rigorous educational experience?"

Statistics suggest that at present only one-third of today′s students reach a level of proficiency in reading and mathematics. "While universal public education is a national good," said Milken, it has also become a national challenge. Today's students are the first generation in our country that will be measured not just by how they do here, but in comparison to students around the world."

Increasing the quality of education is one key to building human capital. "The earlier we invest in education," he said, "the higher the rate of return."

Despite legislative achievements in educational reform in recent years, outcomes demonstrate poor results. For instance, there has been no real progress in increasing graduation rates. As such, Milken wanted to explore the barriers preventing students from competing on a national and international scale, and to consider how to remove these obstacles.

Gov. Tim Pawlenty of Minnesota said that "The public education in the United States is a public institution in a democracy -- and public institutions reflect public sentiment." Unfortunately, he noted, "We have not yet reached a point where public sentiment has declared this a crisis or tipping point -- to the point where the country is ready to move in a quantum fashion." Public polls reflect a "remove," a detachment from the crisis. "When the people are ready for change, there'll be leaders, or a leader will step forward and guide the way," he said.

Just as there has been a newfound sense of urgency for "going green," the country is long overdue for an "educational Al Gore" or "people screaming at the top of their lungs demanding change," the governor said. In order for true progress to occur, "We need a tipping point, and the evolution needs to become a revolution."

Pawlenty agreed that the top school-related factor determining how a child will perform academically is the teacher; however, parental involvement is the chief overall factor determining a child's success.

Susan Tave Zelman, superintendent of the Ohio Department of Education, presented data supporting recent successes in her state. Ohio was the first state to launch an international benchmarking study, comparing its educational system with those in other countries, using a framework of precepts to which high-performing countries typically adhere, including: "high challenges," or world-class academic standards and accountability; "high support,"" the means and capacity to meet challenges: and "incentives," the methods to create the sense of urgency. One of the lessons learned was that Ohio "needed an integrated approach to create a world-class system." As a result, seven interrelated elements representing high-performing systems were born: world-class standards, great leaders, great teachers, excellent student support, fair funding, diagnosed problems, and accountability.

State officials discovered that Ohio does reasonably well in comparison to the U.S. averages, but the state falls among the lower quartiles when compared to the benchmarked countries. "When we look at other countries, in terms of our curriculum," said Zelman, "we're about two years behind." Her goal is to "strategically ramp up" in order to prepare students to be competitive on a global basis.

From a more political perspective, David Dunn, chief of staff to U.S. Secretary of Education Margaret Spellings, said that the No Child left Behind Act is "a formula to change and turn around this education system." The law, he said, is relatively simple and based on the notion that it's important to set high expectations for all students. The idea is to "measure all students to see whether or not they achieve those expectations; provide interventions and resources to schools to help kids who have not met those expectations; and to ensure that there are consequences for the adults in the system based on those measures."

Dunn argued that the nation has seen more progress in fourth-grade reading proficiency since the law took effect, compared to the previous five years, and in that five-year span, there had been more progress than in the 28 years preceding it. He noted that the Department of Education and the Bush administration are of the belief that the debate around public education is beginning to change. "School board after school board, there's much less conversation about band uniforms -- and much more conversation about student achievement and reading curricula and math curricula." Such conversations, he said, are indicative of a cultural change beginning to take place in the nation's schools.

No Child Left Behind is up for re-authorization at the end of the year, and Dunn reported that the president is calling for better use of data in order to "measure student progress over time and to hold teacher and schools accountable for that progress."

Echoing Dunn's optimism, former U.S. Secretary of Education William Bennett said, "In 1998, 64 percent of African American fourth-graders could not read at a basic level. That is now at 54 percent, so that's progress." Additionally, he said, 62 percent of Hispanic kids were below basic levels in 1998, a figure that has dropped to 54 percent.

Bennett argued that cultural shifts in the nation have made it difficult to make a case to students that hard work in school will enable them to "get a job" or gain admission to college. "Who are we kidding?" he asked. "(Students who don′t work hard) may not be able to get into the college of their choice, but they will get into college." This is because most colleges, in his opinion, will accept almost everyone, and the incentives that teachers once had to encourage and motivate students no longer exist. Bennett also noted that parents are less likely today to believe teacher complaints and may even threaten them with litigation.

Culture is more important than politics, Bennett maintained. Politics can make a difference, leadership can make a difference -- but it's what's in the air, what people think, that is important. Essentially, he agreed with research that shows that the quality of teachers has measurable effects on student achievement and that Americans should continue to support efforts that maximize the efforts of the nation's best teachers.

Moderators
Lowell Milken, Chairman and Co-Founder, Milken Family Foundation; Co-Founder, Knowledge Universe Education LLC
Speakers
William Bennett, Former U.S. Secretary of Education; Washington Fellow, Claremont Institute
David Dunn, Chief of Staff to the U.S. Secretary of Education
Tim Pawlenty, Governor, State of Minnesota
Susan Tave Zelman, Superintendent of Public Instruction, Ohio Department of Education
10:15 am - 11:30 am
The growing thirst of the now $250 billion global private equity buyout funds, four times its 2003 appetite, is now a paradigm for demand-driven, higher-risks and lower-returns capital markets arbitrage -- with its axiomatic risk of who will be the last buyer and with its own paradox of opportunity -- even if potentially chaotic and predominately for the bigger players.

Not surprisingly, the panel consensus was generally that the classic bubble effects of money-chasing deals must soon be upon us. As with the classic bubble, there was no agreement on when, how and who. Indeed, there was also a general agreement that structural changes in the complexity of deals, and derivative players, will likely soften the blow as long as the public market can serve as the exit strategy for these private deals. (As if to underscore the timeliness of the panel, the Wall Street Journal announced on this same day the purchase of ABN Amro Holdings by Barclays for $91 billion.)

The most cautionary participant and advocate of the arbitrage model proved to be Rod Davidson, of the Scottish Widows Investment Partnership, who focused on interest rates as the best leading indicators and pointed out that just in the past year collateralized loan obligations (CLOs, derivative loan packages providing liquidity and risk spreading) increased by 193 percent.

While CLOs are distinguished from collateralized debt obligations (CDOs) currently on the front page because of the sub-prime loan concerns, concern was expressed about the parallels of demand-driven available capital going from the A deals to the B and C deals, and the spillover effects of bad results into the broader capital markets.

Davidson asked: What is the best tool for analyzing deals in the current environment? For example, should a deal be opportunistic, based upon a cycle of cheap money and attractiveness as a takeout target, or based on fundamentals? Ted Virtue of MidOcean Partners highlighted the short-term benefits of the derivative markets to smooth out the bumps, coupled with the newer, systemic, highly and variably structured transactions with all manner of diverse instruments in the same transaction. He cited the smoothness of the General Motors market landing last year as the result of these factors.

However, he also questioned when the risk -- "which someone owns" and which then becomes systemically part of the capital system in general -- would inevitably come home to roost, thereby highlighting a general concern with the mysteries of mostly private derivatives. His comments brought to mind Long-Term Capital Management's collapse and its then seemingly enormous $5 billion loss to certain segments of capital markets, and the recognition that every loss is someone′s gain.

Virtue also brought attention to what he considers the potentially greatest, most feared and least factored class of risks to capital markets -- "event risk," such as terrorism and natural disasters, which can potentially result in systemic meltdown.

Alzaz Shaikh of Goldman Sachs observed that "the patterns of capital and returns" that he currently sees are usually associated with a bubble. Indeed, he expressed surprise that default rates had not risen. His concerns were external leverage and financial risk that were out of balance, when compared to internal company risk; and the "compression" of risk and returns in a market that may not even require debt amortization or traditional loan covenant benchmarks, only the payment of interest. The suggestion was that you really have to be underwater to not even be able to pay interest, a situation that does not provide the traditional early warning signs. His conclusion was that "shorter-term windows" were the best way of judging returns. Moderator Kathryn Swintek of BNP Paribas presented graphics, and it was noted that though her data was only two weeks old, it may already be out of date. As discussion turned to country concerns, topics included labor, protectionism and regulatory environments, and Davidson suggested that the French Final Two Election might be a useful Western European bellweather. Virtue recommended the use of emerging markets for comparative purposes; for example, South Africa should be especially looked at comparable to a Western European economic model.

Ironically, the U.S. health-care industry was the specific regulatory concern, given the unknown impact of the 2008 elections on the industry, which is substantially based upon the cash flow of Medicare-type reimbursements, while accounting for 16 percent of GDP and only 8 percent of investments.

Davidson and Virtue also cited the cautionary example of China, which has $1.2 trillion in foreign funds reserves, 90 percent of that being in dollars, and allows the United States to run a foreign current accounts deficit. The question was: How will we feel when our assets are run by China?

Moderators
Kathryn Swintek, Managing Director, Head of the U.S. Leveraged Finance Group, BNP Paribas
Speakers
Rod Davidson, Global Head of Fixed Income, Scottish Widows Investment Partnership
Aizaz Shaikh, Executive Director, Goldman Sachs & Co.
Ted Virtue, CEO, MidOcean Partners
10:15 am - 11:30 am
Frank Gehry is one of the world's most famous architects, responsible for such gems as the Guggenheim Museum in Bilbao, Spain, and the Walt Disney Concert Hall in Los Angeles. Sydney Pollack is an Oscar-winning director whose credits include Out of Africa and The Firm. One year ago, Pollack produced a fascinating documentary about Gehry called, "Sketches of Frank Gehry, an incisive portrait of the famed architect.>p> The conversation between the director and the architect began with a clip from the documentary in which the architect and an associate examine and "play" with a model for a new building. This theme of playing came up often during the conversation, as Pollack wanted to know to what degree childlike play was a conscious decision. The architect replied that such playing, even in industries such as finance, allows participants to be more "innocent" and creative.

Following the clip, Pollack showed a slide of the Guggenheim Museum in Bilbao, which Gehry designed in the late 1990s. Though now considered a magnificent piece of architecture, the audience and panelists laughed when Pollack reminded the group that 10 years passed before Gehry was asked to design another museum. Pollack wanted to know why it took so long to receive another museum commission, and Gehry suggested that "most people just want a building -- they don′t want an emotional investment." Besides that, he said, the powers of the marketplace determine what types of structures get built.

The architect expressed his general disinterest in other people's opinions of his designs, claiming that he is more critical of his work than any professional critic. "I am so self-critical," he said, "and I haven't found one architectural critic who can come close to my own criticism." On the other hand, his firm, Gehry Partners, is one of the most efficiently run architectural firms, and all the buildings designed by Gehry are profitable.

Pollack addressed the controversy that often accompanies a Gehry design and wanted to know what "the big deal" about him. The architect quipped, without missing a beat, "I′m cute!" But on a more serious note, he suggested a few reasons for his continued popularity. First, on a creative level, he continues to explore new ideas, and his work "doesn′t look like other stuff." He said he also pays attention to clients and their budgets -- staying within budget is extremely important. Finally, he said, he doesn't try to be different just for the sake of being different because doing so would be disrespectful to the public.

The interplay between the two artists illustrated what appeared to be very different approaches to their work. Pollack was interested in analyzing and putting into words Gehry's design methods. Gehry, on the other hand, was much more laissez-faire, choosing to follow his intuition rather than scrutinize his creative process. The complementary natures of the two men, however, provided for a lively and entertaining conversation.

Interviewers
Sydney Pollack, Director, Producer
Speakers
Frank Gehry, Architect, Gehry Partners LLP
10:15 am - 11:00 am
10:15 am - 11:30 am
Building on a major theme of this year′s Global Conference, Woodrow "Woody" Clark of Clark Strategic Partners and a Senior Fellow at the Milken Institute, introduced the panel on green building as the "sequel" to the film An Inconvenient Truth. Developers and decision-makers, he said, are now searching for ways to deal with diminishing resources in order to "green" our lifestyle. "What does this mean in terms of dollars and cents? And what does it mean in terms of policy?" he asked. "It means a lot."

The panelists all stressed in the importance of not just working on individual green projects and specific aspects of green technologies, but of taking a more holistic view in which developers and city planners examine not just the social and environmental issues of their projects but also the mechanical and structural issues.

Allisdair McGregor, a Fellow at the consulting firm Arup, presented a proposed community development on Treasure Island in San Francisco. The project incorporates reclaimed wastewater and photovoltaic power systems, as well as a clustering of high-rise residential buildings, all within a 10-minute walk of the ferry to San Francisco, thus cutting down on transportation energy costs.

Claire Bonham-Carter of the British consulting firm AECOM pointed to three developments in London that will share a small-scale combined heat-and-power plant. She added that energy efficiency doesn't mean the same thing for every area. In East Anglia, where water availability is an issue, developers are focusing resources on incorporating water-saving technologies, while in London, they may be focused more on congestion-reduction strategies. In all, the panelists agreed with Gunnar Baldwin of Toto USA, who stated that "investment in new technology has paid off."

With so much public and industry support behind green building technologies, Clark asked the panelists to reflect on the role of public policy in the debate -- whether there's money in it and how it affects green building. Bonham-Carter summed up the stumbling block to going green as a vicious cycle: The designers of buildings say they can design green buildings, but that the developers don't ask for them. The developers say they don't ask for them because there's no interest from the investors. The investors put the blame on the public, and the public in turn claims it would gladly take green if given the choice. Policy should be the instrument to break up this cycle.

Georgia Mercer, president of the Los Angeles Community College District Board of Trustees, noted that the decision to go green has to come from someone with resources. The L.A. Community College District -- the largest in the nation, with around 130,000 students and nine campuses -- plans on building 40 new buildings to at least the minimum LEED standards funded, not by state or local governments, but by two bond measures passed by the board.

It took a dedicated group of individuals to get this project funded, said Mercer. But government incentives are extremely persuasive. Whether it's charging people by volume for the amount of waste they send to sewage-treatment plants (rather than relying on tax dollars to pay for it) or paying citizens and businesses fair-market prices for the clean energy they export to the grid, state and federal incentives make a difference. The wrong incentives can also hamper progress. Baldwin said that the U.S. plumbing industry was technologically left behind, in terms of innovation, because of a lack of incentives to push for efficiency.

The European members of the panel gave some examples of policies in the EU that are already in place for encouraging energy efficiency and improving public awareness of the environmental impacts of their surroundings. A recently passed EU directive, the Energy Performance of Buildings Directive, will require posting of labels reflecting the energy efficiency and carbon dioxide emissions of private and commercial buildings at point of sale. The labels also report a number of no-cost measures that the buyer can take to improve the rating. Prestige companies aren't going to want to be known for doing business in low-rated buildings.

In the United States, one successful policy is San Francisco's deal to push any LEED Gold-certified project to the front of the planning approval queue. Although there is some inefficiency in the system, it has encouraged private development firms to jump on this opportunity. Additionally, these developers find that they can build green buildings cheaply and efficiently, using passive systems and integrated designs, as well as mechanical, technological innovations.

Presenting images of some high-tech Japanese toilets with heated seats and built-in bidets, Baldwin said that the goal of technology is not only to decrease our impact on the environment, but to decrease the impact of living space. Allowing people to age in place is really a fundamental issue for sustainability. Echoing the common theme of the panel, Baldwin noted that "if we let the market demand these types of (technological) improvements, they will happen."

Moderators
Woodrow Clark II, Senior Fellow, Milken Institute; Founder, Clark Strategic Partners
Speakers
Gunnar Baldwin, Water Efficiency Specialist, Toto USA Inc.
Claire Bonham-Carter, Regional Director, Sustainable Development Group, Faber Maunsell, AECOM
Alisdair McGregor, Fellow, Arup
Georgia Mercer, President, Los Angeles Community College District Board of Trustees
10:15 am - 11:30 am
At least 75 percent of a company's value is based on human capital, according to Nobelist Gary Becker. But do CEOs and senior executives really buy into the human capital theory? Do they truly value and invest in their employees?

U.S. business has undergone a shift from "personnel" to "human resources." It is not the mere change of a name, but a major shift from training to learning, said moderator Thomas Grass of Watson Wyatt Worldwide.

Edward Guiliano of the New York Institute of Technology stated that about 3,000 new hires join some large companies each year. Should we train those college graduates after they join the firms? The answer, he said, is a resounding yes. Students today are fundamentally different, and employers have to think about "new channels" for reaching them, and which kinds of technology can be used to train new hires most efficiently.

Employee training today is different from what it was just five or six years ago, said David Owens of Bausch & Lomb. "We need to tell our employees following four things through training," he added, "know how, know who, know where and know why." However, he said, some major problems exist in the training industry. First, human resource is teaching a company's established system rather than training new workers to fit with a company's changing strategy. Second, there is a huge gap between learning and doing in the company, and the result is ineffective training. Finally, said Owens, many trainers are not qualified and need to undergo retraining themselves.

Michael Winston of Countrywide Financial Corporation noted that employee training influences performance improvement. "First," he said, "employees are your company's most important assets. A company can't develop without talent, and the war for talent never stops." But just bringing in talent isn′t enough; a company has to develop the strengths of the people in its employ. "Executives need to focus on what we want our people to focus on," he said. "The probability of how to get $50 million in next seven days is zero if we focus on the idea of how to get five dollars."

Winston reminded the audience that big ideas distinguish one company from the pack. Most great new ideas are easily accessible; it's just that no one thought them through before. The success of Starbucks Coffee is a good example: a good concept that was readily available, easily accessible and new.

When asked how an employer can identify who needs what kind of training, Owens responded that the needs can be defined through various techniques, such as assessments, observations and performance management. Winston said companies should allow employees to undergo training during working hours if indeed their work force is their most important asset.

Winston recalled his experiences at Motorola, when he implemented the company′s innovative Six Sigma system, a new way of measuring processes and quality and devising improvements. The company chose to aim high and achieve reasonable success rate (like 90 percent) rather than to aim low and achieve the goal. When people miss the target, Winston said, they will continuously pursue the target and can typically achieve the goal after two to three years of hard work.

Moderators
Thomas Grass, Managing Consultant, Southern California, Watson Wyatt Worldwide
Speakers
Edward Guiliano, President, New York Institute of Technology
David Owens, Vice President and Chief Knowledge Officer, Bausch & Lomb
Michael Winston, Managing Director, Chief Leadership Officer, Countrywide Financial Corporation
10:15 am - 11:30 am
Competition is the principal driver that sustains relationships between people, between businesses and between countries. For the past 13 years, for example, Mexico, Canada and the United States have worked together through the North American Free Trade Agreement (NAFTA) -- and in doing so have asserted North America's regional competitiveness.

The three countries have benefited in varying degrees from NAFTA. The U.S. economy has prospered from the movement of goods and services across its borders to the north and south. Mexico, which nationalized a large portion of debt in the 1990s, is continuing to look for areas for growth and investment. Canada, too, has benefited, drawing a $13 billion-plus increase in exports since signing NAFTA.

While the three-country relationship has prospered these past 13 years, the world has notably changed. September 11 created a trade-off between economic stimuli and security concerns. The rise of India and China has changed the dynamics of manufacturing goods and delivering services. And surging demands for energy are creating new markets for sustainable growth and innovation.

The challenge of first sustaining and then improving North America's competitiveness in the face of these trends, was the focus of discussion by a diverse panel representing the United States, Canada and Mexico.

Moderator Zanny Minton Beddoes of The Economist asked panelists to identify the main deterrents for foreign direct investment in North America. Attracting FDI is somewhat tricky, as capital tends to flow to more unregulated markets, she noted.

Roberto Newell Garcia of Mexico para la Competitividad emphasized that regulation is a "change agent" to promote efficient cross-border integration. Multinational companies seek to optimize high-value investment where government regulations are lowest. Deborah Wince-Smith of the Council of Competitiveness cited the punitive federal payroll tax in Guadalajara as an example of deterring investment. Investors, she said, went where tax burdens were marginally less or nonexistent.

In the energy market, the Mexican constitution strictly regulates the country's most valuable commodity, oil. As it stands, only the government can explore and produce oil, the this monopoly dissuades foreign investment and deters foreign research into alternative sources, such as natural gas.

Beyond regulations, regional competitiveness is also dependent on the ability to swiftly and safely move people and goods across borders. Garcia discussed how the development of North America's cross-border infrastructure goes hand-in-hand with trade. Ideas were discussed to enhance the movement of goods in a safe and expeditious way. For example, synthesizing border inspection and technological equipment would reduce high border security costs. A deepwater port servicing the surge of trade along the Pacific Rim could be funded through a regional North American effort.

Innovative rail systems connecting ports to distribution centers and cross-border interstate highways require both government and private investment. This collaboration brings potential for North America to set the standard for international travel and global commerce.

With infrastructure development comes the need for energy to power it. The regional competitiveness for North America -- or any region, for that matter -- boils down to energy. Marie-Lucie Morin of Foreign Affairs and International Trade Canada described Canada as "an energy superpower." But even with large reserves and conservative long-term energy exploitation estimations, a major gap between supply and demand of fossil energy is expected by 2020.

With this energy gap comes ample opportunity. Innovation is the driving force in the U.S. economy; the Department of Energy is unleashing huge amounts of money on sustainable energy innovation. Of late, corn is the crop of conversation, as countries and business seek alternative energy sources. Deborah Wince-Smith from the Council of Competitiveness explained corn as a short-term solution, as opposed to other forms of cellulosic biofuels.

The energy balance of corn is poor because the energy exerted in processing ethanol is greater then the energy yield it produces. There is, however, enormous potential in sugar. And with Mexico being the largest producer of sugar in the region, North America has potential to further to diversify its energy sources.

"People live and create in communities," said Wince-Smith, "and these communities are connected throughout the world." The consolidated Americas have proved willing and able to effectively collaborate. For the most part, NAFTA has exemplified fruitful returns for all three countries. Where they go from here depends upon the coordinated effort to synchronize regulation and cross-border infrastructure in a system fueled by clean, sustainable energy.

Moderators
Zanny Minton Beddoes, U.S. Economics Editor, The Economist
Speakers
Marie-Lucie Morin, Deputy Minister of International Trade, Foreign Affairs and International Trade Canada
Roberto Newell Garcia, CEO, Instituto Mexicano para la Competitividad, A.C.
Deborah Wince-Smith, President, Council on Competitiveness
10:15 am - 11:30 am
This session is by "invitation only" and is limited to invited guests. If you are interested in attending, please send an e-mail request to jmeehan@milkeninstitute.org.
Speakers
Ron Dermer, Minister, Economic Affairs, Embassy of Israel, Washington, D.C.
Sarah Steelman, State Treasurer, Missouri
Glenn Yago, Director, Capital Studies, Milken Institute
10:15 am - 11:30 am

Private-sector philanthropy, as moderator Nicholas Stonnington, president of the Stonnington Group, said, is a hallmark of the United States, evidenced by the fact that 86 percent of Americans contribute their money (for a total each year of approximately $260 billion) and more than 50 percent contribute their time to charitable causes. Getting people to give their resources is clearly not a challenge for America's foundations and philanthropies. Rather, the panelists agreed, the challenge lies in individuals and foundations thinking strategically about how and where to make the strongest and most meaningful impact.

The not-for-profit landscape is changing dramatically with the advent and expansion of the Internet and the rise in the numbers of people donating portions of their fortunes rather than bequeathing their assets in wills. More nonprofit groups and foundations are being formed, with half a million NGOs created in China and India in the last year alone. This evolving landscape provides tremendous opportunities for people to make a global impact. When an audience member asked how to humanize philanthropy that has gotten "big and impersonal," actor Bradley Whitford, co-founder of Clothes Off Our Back Foundation, responded that "there needs to be a balance between long-time wise philanthropy and short-term inspirational and tangible philanthropy."

As the world and charitable giving landscape changes, individual roles must also change. But does society need more nonprofits? Mellinger noted that many nonprofits are small, with no infrastructure, and wondered whether people should work with an organization already in existence, which could greater impact with additional resources.

Panelist Robert Davies of the International Business Leaders Forum, feels that as the world becomes smaller, the problems will become more global, increasing the need for individuals and foundations to take a broader world view. These include problems such as slavery, health, and the environment, among many others.

Foundation must keep three objectives in mind. First is to be strategic. Second is to realize that one can make a much greater impact in less developed countries. Third, organizations need to remember that it is often "not the cash that cracks the problem -- it is what you put alongside the money that makes a big difference."

This idea was echoed by Douglas Mellinger, who said, "While many people are very charitable, very few are philanthropic. ... Many people spray and pray." He felt that people hope their cash will do good but ultimately outsource their decision-making to whichever charity they contribute to.

Still, he said, he senses a shift occurring; people are becoming more thoughtful about how they give their time, money, expertise and resources.

People need to think about the social return on their investment, rather than just the financial return of their investment, said Mellinger. This starts by identifying the root cause of the problem and will ultimately lead to the sustainability of change and engagement of the family, rather than just throwing money at a problem.

Whitford brought a unique perspective to the panel as he discussed the power of celebrity to raise awareness and bring the spotlight to issues. After 9/11, he said, the entertainment community began to feel pressure regarding awards shows and whether they had a place in the changing world. Some in the industry felt they had a responsibility to use their visibility to enact change. He and his wife, actor Jane Kaczmarek, wanted to spend their celebrity responsibly. He and the panelists agreed that in a shrinking world, the line between philanthropy and self-interest can begin to blur. They also shared a similar goal: to determine how an individual and a foundation can best bring about meaningful change in a complex and changing world.

Moderators
Nicholas Stonnington, President, Stonnington Group LLC
Speakers
Robert Davies, CEO, International Business Leaders Forum
Douglas Mellinger, Vice-Chairman and Founder, Foundation Source
Bradley Whitford, Actor; co-founder, Clothes Off Our Back Foundation
10:15 am - 11:30 am
Representing varying organizations, the three panelists and moderator all supported a common mission: to engage patients in clinical trials in efforts to advance treatment and prognosis associated with cancer and other chronic diseases.

This is no simple task. While there are several reasons to explain the lack of participation in clinical trials, there is little clarity as to why only modest progress has been made to increase the level of patient participation. Margaret Anderson of FasterCures opened the conversation by speaking of the difficult challenge to recruit and retain patients for trials and cited the startling statistic that only 4 percent of adults diagnosed with cancer enter a clinical trial. The subsequent conversation focused on why clinical trials are a necessity for the advancement of medicine, the factors keeping patients from participating in trials and potential solutions to this industry-wide problem.

"Medicine stands still without trials," warned Howard Soule of the Prostrate Cancer Foundation.

Defining a trial as something that "may not help you but may help others down the road," Anderson related the need for trials to her own experience. Her father participated in leukemia trials after receiving a three- to six-month life expectancy. That participation gave his disease meaning, even though he passed away at the six-month mark. "What is not to be forgotten," she noted, "is the need to go back and recognize people who give because we are all going to benefit, some times at the expense of the participant." In this instance, she was referring to her mother, who supported and enabled her father's participation in the studies.

Despite the apparent benefits of clinical trials, several factors remain impediments to patient participation. A reoccurring theme was the communication gap between physicians and patients. As Anderson stated, "if physicians don′t talk to patients about trials, then the opportunity is missed," The system needs to be patient-driven, she said, which means it must be kept simple and inherently trustworthy. Further, according to Courtney Hudson of EmergingMed, "patients already think they're getting the best medicine available, and they can't imagine that there are doctors who don't talk to each other. Most patients diagnosed with cancer have no idea how many doctors and specialists can add to their knowledge base and situation.

EmergingMed, a 7-year old organization has a solution: the company has created a system in which every patient entering partner sites is screened and entered into a database for future assessment of appropriate trials. The goal is to address the lack of accuracy in government databases, in which 50 percent of the information has been proved incorrect. EmergingMed's philosophy is that if you don't start early, it's too late, because most people exhaust all other options and only then consider clinical trials. As clinical trials are based on standard of care, it can be a two-year delay between the observation of results from a trial and FDA drug or treatment approval. Hudson stated that "getting in early, keeping workload off doctors and nurses are key to success in this."

Communication and reliability of the clinical trial process are also big issues. Although prostrate cancer is considered treatable and curable, 24,000 males exhaust all the primary therapies and run out of other alternatives annually. It is exactly this group that needs to participate in trials. The problem is often that complicated medical and economic issues interfere with trials prior to patients having knowledge of the design or expected benefits of the trial.

In response, a clinical trial consortium or "one-stop-shopping scenario for clinical trials" in the prostrate cancer space has been established, whereby no trial occurs without clearing a coordination center at Sloan-Kettering. The group streamlines the protocols, tools and contracts, and will reject proposed trials that do not meet stringent criteria. According to Soule, 27 of 35 ideas have been approved and turned into protocols. Further, 100 percent of the initial sites are leading at least one of these trials. Soule attributed the success to a very scientific approach that "makes sure very early on that the trial is well conceived and creates a sustainable model that will speed the development of drugs."

A third barrier to patient participation is that placebo-controlled trials were viewed to be a difficult sell for individuals. The panelists agreed that the trial can become a more palatable option for the patient if given the option to cross into the active part of the trial, once the drug is proven to be effective.

Overall, the impediments associated with clinical trials are abundant, and the panelists conceded that it will take a revamp of the health-care system to implement change. Common technology, systems and templates, which do not currently exist, are needed to create efficiency and trust in the clinical trial process. Soule called the lack of an integrated system "as much of a sociology problem as a technology problem." The medical research field is very personalized but lacks basic computer literacy skills, he noted. Health-care workers need to develop technical skills in order to establish electronic health records necessary to improve the clinical trial process.

Further, trials are slow to accrue because they are often poorly designed. The development process is broken -- government bureaucracy is horrendous, taking two years to get a trial started. In addition to being cumbersome, the system is not currently economical and most trials don′t break even on cost. Navigating around both the economic and logistical issues is a major deterrent for corporations. In response, many drug companies are running trials in Asia, where the process is both cheaper and more streamlined.

In summary, the problem of limited patient participation in clinical trials is far from resolved. To solve the problem, increased patient/doctor communication, technological advancements across the industry, and improved cost and efficiency are essential.

And John Walsh of Alpha-1 Foundation stated that "there is a need to put the National Institute of Health′s feet to the fire to engage patients with diseases in the clinical process -- they currently are not focused on engaging the patient, who is ultimately necessary to do clinical research."

Moderators
Margaret Anderson, Chief Operating Officer, FasterCures / The Center for Accelerating Medical Solutions
Speakers
Courtney Hudson, CEO and Founder, EmergingMed
Howard Soule, Executive Vice President, Discovery and Translation, Prostate Cancer Foundation; Senior Fellow, Milken Institute
John Walsh, Co-Founder, CEO and President, Alpha-1 Foundation
11:45 am - 1:45 pm
Moderator Michael Milken's posed an expansive question for the luncheon plenary panel of Nobel Prize winners: What is the future of global capitalism? The result was a wide-ranging, big-picture discussion of the role capitalism has played in increasing society's welfare, and whether this development is likely to continue.

Although the panelists foresaw some potential difficulties on the horizon, the consensus was one of optimism and hope that the spread of capitalism can continue to improve the lives of people around the world.

Nobelist Gary Becker noted that the good news outweighs the bad when it comes to the future of global capitalism. His two areas of concern for global economic development were radical religious movements and government intervention in free markets. In fact, Becker said, he believes that capitalism has the ability to solve most global problems, provided that governments refrain from overregulation or meddling in areas better left to private industry.

Becker also refuted the common misconception that capitalism and democracy go hand in hand. There is no proof that a democratic society fosters economic growth, he argued, citing various examples of countries with democratic governments, but poor economic growth, and nations where authoritarian or military regimes had overseen strong economies. Instead, Becker argued that as a society undergoes economic growth, it tends to adopt a more open political system, often evolving toward democracy. He predicted that if China continues its rapid economic growth, it will move toward a more open political system in the not too distant future.

Kenneth Arrow was also optimistic about the future of capitalism. His major concern, he said, was that societies must learn to adapt to their aging populations. He spent some time discussing the ways in which the diverging demographic trends in the developed and developing world might evolve. Although this could lead to difficulties down the road, he said, he believes that societies should be able to overcome this problem.

Myron Scholes credited the remarkable rise in global living standards over the past 150 years to the rapid spread of technology and communications. These advances have enabled millions of people to raise their living standards. Scholes also discussed the continued development of China′s economy, noting that China has recently moved away from an export led economy toward growth driven by consumer demand, which he sees as a positive trend. He expressed some concern that China's economy may prove to be more volatile than India's -- chiefly because in China most economic decisions are driven from the top down by a small group of political elites. It is extremely difficult, he said, for a small group of decision makers to consistently make correct choices over a long period of time; thus, the odds of China making an economic policy "mistake" are greater than they are in India.

With private equity being such a popular media topic, Milken asked the Nobelists for their opinions of trends, particularly as they apply to governments. The panelists were unanimous in claiming that the entry of governments into the private equity arena was a negative development. Arrow questioned whether the presence of so many participants chasing excessive returns would cause these returns to revert to the mean. Meanwhile, both Becker and Scholes felt that governments generally do a poor job when they participate in private industry. Therefore, governments should not attempt to invest in private equity themselves. If they have surplus capital, they should return it to citizens or outsource its management to private sector professionals.

The session ended with Milken asking each panelists what he viewed as the most important role of capitalism in shaping society. Scholes responded that capitalism can help the poor when the cost of capital is driven lower by such systems as microfinance. He feels that lowering the cost of capital to the poor will have a greater effect on global development than top-down policies implemented by governments and aid organizations. Arrow suggested that governments can improve upon capitalism by intervening in certain situations where the free market does not establish optimal solutions. Finally, Becker stated that the main accomplishment of capitalism is to reduce global poverty and improve quality of life by facilitating economic growth.

The responses to this final question reinforced the panelists' overall optimism on the future of capitalism and global development. The consensus was that the spread of capitalism has contributed to widespread increases in human welfare, and that these advances should continue in the absence of excessive government interference.

Moderators
Michael Milken, Chairman, Milken Institute; Chairman, FasterCures / The Center for Accelerating Medical Solutions
Introduction By
Michael Klowden, President and CEO, Milken Institute
Speakers
Kenneth Arrow, Nobel Laureate, Economic Sciences, 1972; Professor of Economics and Operations Research (Emeritus), Stanford University
Gary Becker, Nobel Laureate, Economic Sciences, 1992; University Professor of Economics and Sociology, University of Chicago; FasterCures Board Member
Myron Scholes, Nobel Laureate, Economic Sciences, 1997; Chairman, Platinum Grove Asset Management; Frank E. Buck Professor of Finance Emeritus, Stanford University Graduate School of Business
2:00 pm - 3:15 pm
An impressive array of statistics can be amassed to show that the United States has declined from its financial preeminence over the past five to 10 years. Since 2000, the U.S. public market share of mobile IPOS has been reduced by 41 percent, while foreign shares of U.S IPOS have increased from zero percent to 17 percent. The relative value of U.S. markets is down, and foreign companies are increasingly going elsewhere to acquire capital.

The panelists agreed that the U.S. financial sector has weakened relative to the rest of the world. They also acknowledged that part of this decline is a result of factors external to the United States; the world has finally developed the capability to challenge America's long-held financial supremacy.

However, they also pointed to two significant internal factors that have exacerbated the decline. First, recent regulation has hampered the American investment climate. Second, litigation resulting from class-action lawsuits has dramatically increased the costs of doing business in the United States.

Much of the recent legislation regulating American finance has its roots in the corporate scandals of 2002. Former Congressman Michael Oxley described the political environment during the this time. "People in my district were grabbing me by my lapel," he said. "Their attitude toward CEOs was to give them a fair trial and hang them." This public outrage led the congressman to co-author the Sarbanes-Oxley Act, and Congress passed an expansive piece of legislation that put new standards in place for all public U.S. company boards, managers and accounting firms.

Although the corporate scandals of 2002 required some legislative response, a few panelists argued that certain provisions in the Sarbones-Oxley Act have produced unintended consequences, putting the U.S. financial sector at a competitive disadvantage and stifling innovation. Robert Grady of the Carlyle Group pointed out that the initial public offerings brokered for venture-backed firms like Intel, Cisco and eTrade would not be possible today because of the high transaction costs created by the legislation. He argued that these costs have prevented smaller companies from getting off the ground, holding back innovation and growth in the economy.

Other recent legislation and policies are additional "self-inflicted wounds," added Grady. He cited the decimalization of the NASDAQ, the Regulation Fair Disclosure ruling and the research settlement pursued by New York Attorney General Elliot Spitzer as particularly negative developments, even for the small investors whom the measures were designed to protect. Gray noted, "The little guy has less research, so he has less information, there is less market making, so there is less liquidity. How has the little guy been made better off? He is absolutely, observably worse off."

Panelists focused on the high costs firms bear in the United States as a result of litigation. Arthur Culvahouse of O'Melveny & Myers illustrated why foreign firms are more wary of doing business in the United States through the example of China Life, which was the last P.R.C.-owned firm to list on the NYSE and faced litigation shortly after it made its decision to list. "This illustrates the vicious cycle," he said. "Foreign companies list here, they get something wrong or a rule changes, their market cap goes down, and bang they're sued. I think that it's a cost of doing business that we increasingly can not afford now."

Discussing the cost of inevitable lawsuits, Leonard Schaefer of Wellpoint noted, "It's a very serious problem. If you are running a company of any size in this country you just wait to be sued and you try to settle. We used to have a dollar amount we tried to settle immediately rather than wasting any more time, and its incredibly expensive."

The panelists discussed several solutions for reducing the burden of unnecessary legislation. Congressman Oxley pointed out two steps in the right direction: the Securities Litigation Act and the new federal law that will force class-action lawsuits to be heard in federal court. Grady argued for legislation at all levels of government that chip away the incentives for inappropriate lawsuits. Moderator Hal Scott of Harvard University argued for giving shareholders the right to amend corporate charters so that they can decide how firms respond to lawsuits.

Responding to the prompt "Is the U.S. losing its standing as the world′s financial superpower?" the panelists issued a unanimous yes. Good public policy alone cannot prevent the world from closing the gap in finance. However, it can begin to reverse recent domestic developments that have put the United States at a strong comparative disadvantage.

Moderators
Hal Scott, Nomura Professor and Director, Program on International Financial Systems, Harvard Law School; Director, Committee on Capital Markets Regulation
Speakers
Arthur Culvahouse Jr., Chair, O'Melveny & Myers LLP
Robert Grady, Managing Partner, Venture Capital Group, Carlyle Group
Michael Oxley, Vice Chairman, NASDAQ; Former U.S. Congressman, Chairman of the House Financial Services Committee
Leonard Schaeffer, Founding Chairman and CEO, WellPoint
2:00 pm - 3:15 pm
Proposals for what is needed to fix the problems with public education in the United States are prolific. Yet solutions remain few and far between. Various interest groups expound the shortcomings of our public schools and claim that more resources -- more money, more teachers, more time -- are necessary in order to see results. This session focused on what is arguably the most important factor influencing school performance — teachers -- and tackled the difficult issues surrounding what makes a good teacher, how to attract these individuals and how to measure their performance.

According to moderator Lewis Solmon of the National Institute for Excellence in Teaching within the Milken Family Foundation, studies show that the importance of teacher quality to a child's educational experience is nearly equal to that of home and family. Improving the quality of teachers has the potential to close the achievement gap between high- and low-performing schools and between ethnic and language groups.

Yet the quality of teachers has, by many measures, been declining. The percentage of teachers scoring in the top decile of high school achievement tests, for example, dropped from 24 percent in the 1970s to 11 percent in the early part of this decade. The most inexperienced teachers often teach in the nations high-poverty schools, worsening the achievement gap between the nation's wealthiest school districts and the most impoverished.

Frederick Hess of the American Enterprise Institute explained that "effective teachers teach content and knowledge. They develop cognition and character." Not only that, but "they make their colleagues more effective," he said. Alice Seagren of the Minnesota Department of Education added that an effective teacher is one who is passionate about what he or she is teaching, understands the content, wants to impart that knowledge to children and expects that all students will succeed.

Solomon asked how teachers should be evaluated. Is testing the way to go? And why does there seem to be resistance to performance-based pay and regular evaluation? Education consultant Charlotte Danielson, who has written frequently on this subject, said the techniques don't yet exist to properly assess student learning in the some important areas and that this makes standardized testing of teacher performance ineffective. She argued that teaching is successive, cumulative and collaborative, and that in-school factors must receive consideration: curriculum quality, schedules, the discipline system, grading etc. We need to focus less on effective teachers and more on effective teaching, she explained, noting that, "It is not so much about measuring teacher effectiveness as about promoting teacher learning."

Hess said that he favors teacher testing but also encourages metrics, such as 360-degree evaluation, with feedback from co-workers, parents etc. He argued that we have good ways to measure things like how many students pass a grade and which teachers rate in the top 25 percent, but that we must decide whether or not we are serious about collecting this information and measuring it over time.

Robert Weil of the American Federation of Teachers noted that teachers also need more support. Since teaching is not static, he said, teachers need to learn effective teaching techniques rather than just curriculums. We can't use single measurements to get a good estimate today; we need evaluations based on solid instructional standards -- and we must give teachers valuable feedback to improve their teaching.

Seagren supported the use of tests but warned that standardized testing alone should not be the sum total of how teachers are evaluated. She stated that we need an objective method, as well as a value-added model that will allow teachers to show the impact of the value they've imparted to students. A teacher's job is to impart knowledge to a child, she said, adding, "We should be able to face the fact that we need to measure that impact."

One view, at least in part rejected by the panel, is that teachers need increased salaries in order to make the industry competitive in the hiring market. According to Solmon, if every teacher in the country received a base salary increase of $10,000, that would cost $30 billion annually, too much money for current legislatures to stomach, and too little money to really make a difference when recruiting teachers to the profession.

On the other hand, Hess argued that we have a system of universal education that came of age in the early 20th century in an "accidental labor market," when career-driven women essentially had two options, teaching or nursing. "What we had was a massive captive labor pool" he said, but these circumstances have changed. "The people who became teachers out of necessity are now astrophysicists or engineers."

Seagren pointed out that the teaching profession is still dominated by women, but that women now have many more opportunities. "We have an economic issue when the private sector is willing to pay a math or science person more than they′ll earn as a teacher," she said. "After a while, many get lured to the private sector."

The panel also addressed the basis for teacher compensation. Hess explained the evolution of experience-based pay, which attracts a risk-averse set of individuals. This contrasts sharply with young professionals in today's market, who are more attracted by merit-based pay and change. The distribution of teacher salaries and their structure are real challenges for today's school districts. Seagren pointed to the success of her state's Q-Comp program, which also encourages teachers to stay engaged and elevate the quality of education for their students. She believes such programs are essential and warned that "if we aren't careful we're going to create a culture with a small percentage of very educated people" and a large percentage who are undereducated for the global marketplace.

There was little debate that more highly trained and effective teachers are essential to the success of the nation's youth. But how to attract and retain these teachers is a real challenge. And determining how to evaluate their performance, and compensate them for it, is perhaps an even more difficult debate. This panel raised important questions about the future of education in the United States and encouraged participants to think about the long-term implications of the various strategies for reform. Teachers will play an essential role in the future of the United States and its work force, they agreed, and we cannot afford to ignore this issue.

Moderators
Lewis Solmon, President, National Institute for Excellence in Teaching; Senior Advisor, Board Member, Milken Family Foundation
Speakers
Charlotte Danielson, Author and Educational Consultant
Frederick Hess, Scholar and Director, Education Policy Studies, American Enterprise Institute
Alice Seagren, Commissioner, Minnesota Department of Education
Rob Weil, Deputy Director, American Federation of Teachers
Gerald Zahorchak, Secretary of Education, Commonwealth of Pennsylvania
2:00 pm - 3:15 pm
China has seen tremendous economic growth in the past three decades. With this history of successes, the question arises: Is China in need of political reform? Moderator, Graham Earnshaw of Xinhua Finance News kicked off the panel by asking, "Why would a country experiencing 10 percent annual growth over the past 30 years need to rethink political reform?"

Most panelists agreed while this was a very good economic track record, China would have to institute political changes to facilitate future success. But Andy Rothman of CLSA Asia-Pacific Markets suggested that the question wasn't whether political reform would occur. "The question," he said, "is what type of political reform."

The panelists agreed that even with China's economic success, the central government is not fully addressing key issues, primarily social issues that include lack of education, lack of health care and environmental concerns. Rothman noted that 85 percent of people in China don't have medical insurance and 50 percent of farmers can't afford a doctor. And Sean Wallace of Darby Overseas Investments pointed out that while education and health-care spending are growing at 18 percent a year, China lags behind international standards.

These were all examples of how the social safety net is not yet in place to sustain the growing society. Wallace noted this is causing a lack in consumer confidence and that people won't spend money until they feel secure. And the current social safety net certainly won't be adequate to help the country cope in the event of an economic downturn -- which at least one of the panelists, Rothman, believed was an eventual certainty.

J. Stapleton Roy of Kissinger Associates and a former ambassador to China, said he believed political change will come through the people and newer government leaders who are listening to them. Many of the future leaders will have been educated in the West, he noted. They will face the same problems that today's leaders face, but their responses will be different. He cited the recent passage of the Property Law, would not have happened just 10 years ago.

Frank Sixt of Hutchison Whampoa noted that the process of absorbing Hong Kong will drive mainland China to at least consider a more representative form of government. Other panelists agreed, though no one could predict how much representation the central government would concede. Roy pointed out that the challenge for China will be moving toward a more representative form of government without losing control, as had happened with Mikhail Gorbachev. Most panelists seemed to agree that change will not end in a Western-style democracy.

Sixt pointed out that some changes are already taking place. For example, Property Law, he said, protects individuals' interests, even against the state. And Mr. Rothman noted that home ownership has gone from 13 percent 10 years ago to around 70 percent today.

Sixt said he has had experience dealing with mainland China courts and gave them a "mixed report." The further away one is from the center of core policy, he said, the greater the risk of running into some level of corruption. And while the level of corruption is high, charges are being brought against even high-level officials. "China goes after big fish on corruption issues," he added, "and punishes severely."

Most of the panel agreed that while changes in the rule of law are necessary, the social issues are much more pressing. Wallace predicted that those changes will deal with privacy and individual rights, and that we will see very gradual changes not touted by the U.S. media. And the bigger change will be in China moving from a manufacturing to a consumer economy. As the safety net grows, people will feel more confident and invest more in real estate and putting money in savings accounts.

Everyone seemed to agree with the changing role of media, and the Internet in particular. Rothman and Sixt both pointed to the Internet as a way for news to reach the people. "The Internet is like water and will find a path (to the public)," said Sixt. However, both men emphasized that the path is not yet fully developed, and Rothman noted that while sports news and financial information are openly available, political news is still an issue and won't be available for quite a while.

Moderators
Graham Earnshaw, Editor-in-Chief, Xinhua Finance News
Speakers
Andy Rothman, China Macro Strategist, CLSA Asia-Pacific Markets, Shanghai
J. Stapleton Roy, Vice Chairman, Kissinger Associates Inc.; former U.S. Ambassador to China
Frank Sixt, Executive Director, Group Finance Director, Hutchison Whampoa Ltd.
Sean Wallace, Senior Managing Director, Asia Pacific, Darby Overseas Investments Ltd.
2:00 pm - 3:15 pm
U.S. health care and education, as well as globalization were the main topics discussed by Katherine Baicker of the White House Council of Economic Advisers. She opened her session addressing the way in which globalization is affecting the U.S. economy.

"The advantages of globalization," she said, "will come from liberalizing the trade of goods and services." Benefits would be complemented by gains in U.S. living standards of living; those gains from trade are spread out across the population, she explained, while negative effects tend to be more focused, such as the loss of jobs in a specific industry.

Thus, she noted, workforce training and retraining are key to successful competition in the global business arena. "Investing in human capital has a much higher return than ever before," she said, suggesting that, from an economic perspective, investment in human capital should receive the same tax incentives as investment in physical capital.

Education requires good governance and accountability, as well as metrics so that parents can make informed decisions about their children's K-12 education, according to Baicker. And workers who complete their K-12 education generally adapt and retrain more easily in the face of changing economic conditions.

Baicker also addressed the U.S. health-care system, which she acknowledged is hinged on policies drawn up years ago -- a situation that fails to recognize changes in the sector.

An increasing a percentage of U.S. GDP is being spent on health care, but the country is not really achieving proportional increments in health-care quality, she explained, adding that the United States spends twice as much in health care than many other countries but doesn′t get twice the quality of health care. Nor does Baicker see sufficient transparency. She argued that a lack of clarity between how much a medical service costs and its associated quality forces individuals to make the ill-informed decisions about their options. Many physicians don′t know the cost of the medical procedures because there aren't incentives for them to know this information.

The federal government (as the purchaser of half of the health care in the country) has the role of promoting electronic recordkeeping in order to avoid test duplication, which Baicker identified as a major source of the high costs of health care.

President Bush has called for reforming health care through reforming the tax code; existing legislation does not provide the incentives to make health-care spending more efficient. Preventative medicine, said Baicker, generally pays for itself in the long run. But without proper transparency for costs, patients again may not be making the best-informed choices. If the cost of preventative medicine is negative, she even went on to say, health-insurance companies could do better paying for preventative health care.

In response to an audience question, she also suggested that Americans have to face tough reality: health care will always be rationed because of budgetary concerns. By this, she meant that not every person can get access to every procedure. And in those areas that receive high percentages of federal health spending, people may not even have adequate access to health care. "It is an unpleasant reality that we must look at the costs and benefits of health-care spending," she added.

Interviewers
Rick Santelli, Bond Market Reporter, CNBC
Speakers
Katherine Baicker, Member, Council of Economic Advisers
2:00 pm - 3:15 pm
The panel opened with unanimous agreement that investment possibilities in Russia remain good, even excellent, over the long run. But panelists also expressed concern about the short-term prospects.

The Russian economy continues to grow, with more direct investments in the country, said Andrey Vavilov of Institute for Financial Studies. "Liquidity management policy is the key to success," he said. The current Stabilization Fund, or Stab Fund (previously known as Debt Fund) totals more than $100 billion, and the main problem is how to spend this money.

The application of liquidity management policy is one way to succeed, he said. Key features of such a system would include concentration on the long-term target, flexible risk management and global diversification. Another important step would be to make the Stab Fund an independent agency that would no longer fall under management of the Central Bank.

Vavilov acknowledged that most of the changes that have taken place in Russia over the past seven years were caused by the world rise of oil prices. But he noted that the Russian market is still very volatile and that Russia may be ready to accept lower prices for its oil. Meanwhile, the Russian financial system has grown dramatically and is nearing international standards. Remaining issues include the lack of an appropriate regulatory system and bureaucracy that affects both foreign and domestic investors. He concluded that the Russian market is attractive, but that investors must exercise caution.

Giedrius Pukas of Troika Capital Partners noted that careful investors will do very well in Russia, and that now is, in fact, a good time to build business. Russia is too big to be ignored, he said. Currently, the country is in the post-crisis stage, with new business owners focused on building value. Over the past four to five years, he added, Russia has been preparing to accept foreign investments. Today its priority should be on stabilizing the banking and finance sector. Russians need financing, which is currently hard to obtain from the banks. He concluded with the optimistic view of enormous growth in the private equity market.

Patricia Cloherty with Delta Private Equity Partners also expressed optimism about the future of the Russian economy. She suggested that investment opportunities in private equity are endless and said that her company has invested $500 million in 54 Russian companies, with primary focus on the consumer-oriented and media companies. Cloherty did caution that corruption remains a problem in some areas.

Clemens Grafe with Europe, the Middle East and Africa, UBS, agreed with the other panelists that investment opportunities abound in Russia, though he stressed that international expectations are too high. Russia has a huge and growing consumer market, largely due to rising oil prices. But the oil and gas sector is the slowest-growing sector of the economy, where the construction, mortgage and finance sectors, among others, are enjoying surges.

"We are positive in terms of investing in Russian banks," said Grafe, though he noted that risks remain because of poorly defined rules and regulations. He described a similar scenario for the energy sector.

The panelists concluded as they began, agreeing that Russia is a land of great investment opportunity but underscoring the need for knowledge and caution.

Moderators
Elena Barmakova, Founder and Chairman of the Board, Fontvieille Capital Inc.
Speakers
Patricia Cloherty, Chairman and CEO, Delta Private Equity Partners LLC; Manager, U.S. Russia Investment Fund and Delta Russia Fund LP
Clemens Grafe, Co-Head, Europe, the Middle East and Africa, UBS
Giedrius Pukas, Executive Director, Chief Investment Officer, Troika Capital Partners
Andrey Vavilov, Chairman, Institute for Financial Studies; former First Deputy Minister of Finance, Russia
2:00 pm - 3:15 pm
Social networking communities like MySpace, YouTube and, most recently, Prosper.com are being called by many the "next big thing" in business. But are they really a new and different kind of business model? From a social perspective, do they really provide unique and expanded benefits to their members? And finally, are they good investment opportunities of precious capital?

Based on their personal experiences starting, running and analyzing community-based businesses, the panelists challenged widely held assumptions and shed new light on how to launch a successful social networking venture.

"We are already all members of many groups," including alumni associations, sports teams and religious organizations, said Barry Libert of Shared Insights. We just don't think about real-world communities the same way we do virtual communities. But community banks, for example, have existed for decades, matching borrowers (who take loans) with creditors (who make deposits).

All panelists seemed to agree that social networking communities are a natural evolution of business. A society fulfills its needs by means of economy, said Christopher Meyer of Monitor Networks, and digital social networking is just the next step in that evolution of economics. Chris Larsen of Prospect Marketplace suggested that this is essentially "getting back to the roots" of the message "no people, no value."

So what are some of the common features of this new business model? First of all, it is premised on an assumption that collaboration is good.

Yossi Vardi of International Technologies listed some of the forces that drive people to participate in communities. The most important, he said, is collaboration. "People are wired for collaboration," he explained, "and most of the time it works." Vardi even suggested a physiological reason for this: humans like collaboration because positive interaction releases dopamine into the bloodstream.

To facilitate collaboration, a community must also have openness and transparency to ensure trust between members and establish credibility of the community as a whole. Third, while self-expression is another key driver of communities, self-governance is critical to maintain the proper balance of individual versus group interests. Self-governance, said Libert, becomes the "invisible hand" that protects your interests.

And underlying all these common features is the concept or business around which members of the community want to "engage."

"Viral (marketing, when embedded ads are conveyed, for instance, at the bottom of an e-mail) is a very misused word," he said. Word of mouth and the engagement of people with common interests are every different from viral marketing; communities start by asking people questions that provoke emotion, and then develop from there.

Having said that, the most successful businesses start with innovative ideas. The technology is the tail end of the process. "Once you can reduce (an idea) to an algorithm," said Vardi, "the magic goes away." Long before that step, many creative questions must be asked and answered about how the community changes the way members work, what member capabilities are required and what value is created and derived by members.

Vardi pulled up a web site, www.20q.net, onscreen for the audience. The site offers several versions of the guessing game 20 questions and seems to have a high success rate in guessing animal/vegetable/mineral nouns (among other things, such as movie and television tiles) quickly though a methodical posing of questions. The audience chose the word "wheelbarrow" for its word and answered questions generated by the program. For instance, "Is it something you can buy?" "Is it square?" "Is it something used in the garden?" After just a dozen questions, it hit upon the correct answer.

People working in collaboration can achieve similarly results through collaboration -— more quickly and easily and correctly than people will by themselves. The computer game poses questions that must be answered methodically (and accurately); in real life, Vardi seemed to suggest, collaborative groups would naturally track questions asked (so they wouldn't have to answer those same questions posed in numerous variations); and they would tend to be sure that, along the sequence, they found the best answers.

There are many different kinds of potential business models. Craigslist.org, for instance, is a not-for-profit enterprise, seeking instead to create consumer utility. In reality, potential social-networking entrepreneurs can fund their investments and generate revenue through a number of way, ranging from subscriptions and sponsorships to advertising and user support. And these methods can be mixed together, depending on the goal and scope of the community and its members.

For those hoping to make their fortune from social networking communities, Vardi offered an interesting perspective on the prospects: The first hundred million users, he said, are the most difficult go get and hold on to -- but that's also the threshold for success these days.

When Vardi sold ICQ (which had pioneered instant messaging) to AOL for $400 million, he said, people asked him if he thought AOL was being rational. He responded by saying that if he had been rational, he would not have sold the business to AOL, and if AOL had been rational, it would not have bought the business. Neither the buyer nor the seller had any idea how successful ICQ might be, but ICQ did eventually add significant value to AOL's overall business. From that perspective, Vardi said, "We think revenue is a distraction."

Moderators
Yoram (Jerry) Wind, The Lauder Professor; Founding Editor, Wharton School Publishing; The Wharton School, University of Pennsylvania
Speakers
Chris Larsen, CEO and Co-Founder, Prosper Marketplace Inc.
Barry Libert, CEO, Shared Insights LLC
Christopher Meyer, Chief Executive, Monitor Networks, Monitor Group
Yossi Vardi, Chairman, International Technologies Ventures (Tel Aviv)
2:00 pm - 3:15 pm
Financing the development of the necessary infrastructure to keep the world's economy ticking in the 21st century is perhaps one of the most consequential endeavors we face. This panel, comprised of experts hailing from diverse backgrounds, commented on the challenges and opportunities that the public and private sectors will face.

Political barriers, which restrict the flow of capital to investments where they can earn the highest levels of risk-adjusted return, are the greatest impediments to infrastructure development in the United States, said Jeffrey Schwartz of ProLogis, and the net effect of the many political impediments is that there is underinvestment in U.S. infrastructure.

The need for infrastructure development is great, requiring both public and private funding. To meet the needs of repairing existing rail, roads and waterways, and developing new infrastructure, the United States will require tens of trillions of dollars in the coming decades. And while hundreds of billions of dollars are looking to be invested in infrastructure, there is a lack of political will to marry the supply and demand of funds, a phenomenon that Dana Levenson of the Royal Bank of Scotland described as "cutting our noses to spite ourselves."

Each day of delay in upgrading the U.S. infrastructure results in a marginal increase in the de facto taxation on U.S. GDP. Over the years, the United States has experienced a steady decrease in the percentage of GDP going into infrastructure, shrinking from 3 percent of GDP several decades ago to approximately 1 percent today. As U.S. infrastructure has decayed, the efficiency with which goods can be transported has decreased, resulting in higher prices for products and services.

As Richard Ford of K&L Gates stated, the fact that "we talk everything to death" in the United States is partly to blame for the deficiency in infrastructure investment. Richard Little of the University of Southern California acknowledged the tremendous amount of infrastructure that will need to built but defended the political debates that precede such investment, arguing that they are necessary to quell the negative externalities of infrastructure growth. He pointed to the problems of air quality surrounding the ports of Los Angeles and Long Beach in justifying public debate prior to infrastructure investment.

Aside from the years of political debate and environmental impact studies that often precede major infrastructure projects, infrastructure growth is often driven by "teachable moments," or major failures in existing facilities. Panelists likened this to the sudden focus on terrorism after September 11. Terrorism was a problem prior to 9/11, but it took a catastrophic event to motivate politicians to focus on a remedy.

A hypersensitivity to foreign ownership also imposes a barrier to inflows of overseas capital to financing domestic infrastructure investment. Mic Dinsmore, formerly of the Port of Seattle, captured the sentiments of the panel in describing the Dubai Ports World controversy as "one of the biggest fumbles I've seen in how to shape the political agenda." The irrational fears of U.S. legislators, such as Sen. Charles Schumer, over the proposed turnover of operations in six U.S. ports to Dubai Ports World has resulted in many foreign companies becoming hesitant to invest in U.S. infrastructure concerns.

Absent rigorous public debate and in the presence of focused political will, massive infrastructure projects can be completed in a relatively short amount of time. The panelists lauded the recently completed Yangshan deepwater port, near Shanghai, which will has a capacity of 25 million TEUs (20-foot equivalent units, a measure of container capacity). The port took just six years to complete -- about the same time it takes just to approve an infrastructure project in the United States.

While private financing is important in building infrastructure, government leadership is also crucial. Schwartz used the example of the Yangshan port to highlight this fact. He argued that while the private return on investment for the Yangshan port alone is low, the public return -- in the form of economic benefits accruing to Shanghai and the overall Zhejiang and Jiangsu region -- is enormous. Because private investors alone would never capture any of these public returns, it takes government foresight and political leadership develop the crucial infrastructure necessary for economic growth.

Moderators
Louis Conforti, Managing Director, Head of Global Real Estate Securities, Stark Investments LP
Speakers
Mic Dinsmore, Emeritus CEO, Port of Seattle
Richard Ford, Senior Counsel, K&L Gates
Dana Levenson, Managing Director and Head of North American Infrastructure, The Royal Bank of Scotland
Richard Little, Director, Keston Institute for Public Finance and Infrastructure Policy, University of Southern California
Jeffrey Schwartz, CEO, ProLogis
2:00 pm - 3:15 pm
The increased burden of health costs has created a need for integration across a range of services, as well as at the individual level, noted Ron Loeppke, M.D., who opened the panel with a discussion of the converging trends in health care that are affecting employers. The health of the work force, he said, is linked to the health of the business. As a result, there has been a recent upsurge in interest around integrating population health and productivity enhancement. Further, the emphasis has been beyond typical care management and into prevention and wellness.

Employers' whole-health productivity costs average three dollars in productivity loss for every dollar spent on medical pharmacy costs. In response to this statistic, a Harvard/HPQ survey was conducted to evaluate what is driving employer health-care costs when presenteeism and absenteeism are combined. The survey also looked at the relationship between workplace productivity and health risks, as 61 percent of respondents believe that there is a strong link between the health of the work force and the bottom line of the company.

Health risks are segmented into two categories: lifestyle and disease management. While historically most of the emphasis has been placed on mitigating disease management risks, improvement in lifestyle has proved to be an area in which increased attention needs to be placed. Annually, more than 900,000 deaths are premature and attributable to such unhealthy lifestyle choices as tobacco, poor diet and lack of exercise. According to Loeppke, "prevention is an investment that ought to be leveraged -- it's not a cost that needs to be justified." The total population enhancement approach that he presented addressed just this, the need to look beyond the 15 percent of people with complex health-care problems, and work with the other 85 percent, as well. The approach focuses on wellness and lifestyle programs, in addition to disease management.

Closing the quality gaps in health-care services is the first step in lower productivity costs. The panelists agreed that integration is key because poor quality in health care ultimately drives higher costs to both employers and employees. Over one-third of employer money spent on health care is a result of medical mistakes, preventable drug interactions, misprescribed medication and unnecessary surgery. One reason for the low quality of service is that patients are not evaluating physicians. On average, Americans receive evidence-based care only half the time. For diabetes patients, this number is 45 percent and, as Loeppke referenced, this creates a "big opportunity to improve the quality, and therefore the impact, on cost in this country."

Two case studies were presented to demonstrate the productivity gains associate with building a culture of health and developing lifestyle enhancement initiatives within companies. In a CDC Cornell study, researchers observed a company with 58,000 employees had lost 27.43 days of productivity per full-time employee per year. The company implemented initiatives, such as such as cash incentives to take a health-care assessment and participate in health enhancement and education programs in order to build a culture of health. The results were impressive: the health status of employees improved by 9 percent from 2005 to 2006, as evaluated by a health-care assessment. This was largely due to improvement in nutrition, physical activity, stress management and metabolic syndrome. The economic benefit to the company was also apparent; the population segments involved in the company′s health programs saw a 30 percent reduction in medical and pharmacy costs compared to those not in programs. In total, the benefit to EBITDA was $2.5 billion in annual savings.

A second case study presented by Martin Olson of Matria Healthcare indicated savings of $14 million per member per month (PMPM) through implementation of similar initiatives. The study applied a seven-segment analysis and looked at the company population based on employees with no risk, unknown risk and total risk. Total risk was then broken into lifestyle risk and disease management risk (DM). Initiatives targeted at reducing lifestyle risks have high costs initially, but the savings in DM risk were more than $6 million. For employees with DM risks, emergency room visits decreased by 15 percent and hospitalizations decreased by 22 percent. Olson indicated that the company can then drill down into the data to understand the result in dollars and increased productivity.

In summary, it is necessary to incur the upfront costs to improve lifestyle, with the economic benefit to be realized in the future. People classified as "no risk" today are not spending a lot of dollars but are spending considerable money later on, which is why it is necessary for companies to invest in lifestyle and prevention programs. Olson noted that "an ounce of prevention is going to be worth a pound of cure, but it's not today -- it is going to take time to develop."

Speakers
Martin Olson, Senior Vice President, Research, Development and Informatics, Matria Healthcare
2:00 pm - 3:15 pm
Global competition is intensifying, and if the United States is to succeed, the country's children must flourish. Evidence clearly demonstrates that investing in youth from the outset increases their chances of growing into healthy, productive adults.p> Moderator Robert Dugger of Tudor Investment led panelists Eva Blum of PNC Bank, Dennis Winters of the Wisconsin Department of Workforce Development and Julie Wright of the San Diego Regional Economic Development Corp. in a discussion of the way Americans invest in their children′s future, including early childhood health care and education.

With global competition intensifying daily and the national debt skyrocketing, the future of America's young people depends on a commitment to excellence in early education. Panelists agreed that a sound investment strategy and proper goal-setting will yield smarter, stronger and more confident minds and reveal hidden talents upon which the U.S. economy depends.

For this reason a consortium of business leaders, economists and philanthropists have drawn up a plan, Partnership for America's Economic Success, to help make the successful development and education of children a top economic national priority.

Astoundingly, more than 20 percent of U.S. workers are functionally illiterate and innumerate. High school dropout rates are increasing year by year, and the United States has the highest child poverty rate of the 20 developed countries belonging to the Organization for Economic Cooperation and Development (OECD).

The Partnership takes a three-pronged approach: Phase I is gathering evidence of the economic impact and laying the groundwork. Phase II is building coalitions and developing policy agenda; and Phase III is an advocacy stage.

"Skill begets skill," said Wright. "We must focus on the private sector ... import the talent and export the jobs." Furthermore, she added, "We must focus on growing the talent here, in our own country, rather than lose it to other countries."

Children must learn to first learn to read, then read to learn, added Winters. But it is a sad truth that U.S. support for early childhood education lags far behind that of other nations, she said, including that of most European nations.

"The vehicle for change is advocacy, grants and volunteering," explained Eva Blum. "We want our children to grow up being great. The first five years of life are the most critical for (mind development)."

She noted that economic development across communities is of vital importance. Children without proper education face poverty and may turn to crime, which is a negative burden on the community, socially and economically. Meanwhile, the result of a solid early education is an increase in savings, greater ownership, less special education and less crime.

Within the research agenda are five areas of focus. First, the microeconomic net gains from a solid early education; second, the macroeceonomic gains, including job creation, global competitiveness, fiscal sustainability and economic growth; third, sector analysis of jobs and GDP; and fourth, financial policy, the "how to pay for it all." Finally, the "communications part," or, the best ways to communicate findings and inform policy makers of the results so that change can become a reality.

By 2012, panelists explained, the partnership's goal is to have more than a million members in the coalition. By 2014, the goal is to work toward including in the federal budget the means to make the lifetime well-being of every child the highest priority of the government.

"To succeed, we must work together," said moderator Robert Dugger. So far, 12 donors have committed $3.11 million to help fund this economically vital project, so important for the future leaders, movers, and shakers of our country's economy.

Moderators
Robert Dugger, Managing Director, Tudor Investment Corporation
Speakers
Eva Blum, Senior Vice President, PNC Bank, The PNC Financial Services Group Inc.
Dennis Winters, Chief, Office of Economic Advisors, Wisconsin Department of Workforce Development
Julie Meier Wright, President and CEO, San Diego Regional Economic Development Corporation
3:25 pm - 4:40 pm
The panel initially focused on the broad U.S. real estate run-up over the past 10 years. Panelists from backgrounds as diverse as residential/retail/commercial real estate and financial markets discussed recent trends across various segments and geographies, the recent performance of the U.S. capital markets, and real estate securitization and its effect on real estate liquidity. They backed their observations of the overall state of real estate with various financial indicators.

The real estate markets have performed phenomenally over the past 10 years, averaging 14.5 percent annually when measured by NAREIT and 12.7 percent by NCREIF. This performance has far outstripped bonds and stocks which averaged between 5 percent and 10 percent.

There are many reasons for this strong performance, namely the compression of corporate bond yield spreads and the huge inflow of capital from institutions and investors into real estate securities.

Consumer confidence and psychology continue to be major drivers of real estate demand. Following 9/11 and the technology bust, sectors such as office and industrial real estate were experiencing negative absorption and increasing vacancies as consumer confidence remained low. However, these markets have seen a reversal since 2003 as consumer confidence rebounded and demand started to drive down vacancies through positive absorption. As such, the office markets now enjoy a 12.5 percent vacancy rate, averaging better than its historical 13.5 percent.

Ironically, the shopping center and retail markets remained strong; consumers never went away. This market was driven by the strong residential market, which allowed consumers to refinance and draw equity from their homes and accordingly drive the retail markets. For example, condominium owners, who enjoyed 10 percent to 15 percent year-over-year growth on their homes, were able to draw equity to finance retail purchases and drive the retail real estate industry. As such, retail has been a real estate darling over recent years, with fundamentals for malls, premium outlets and international retail development remaining strong.

Robert Toll, CEO of Toll Brothers, commented that the residential markets, especially condominiums, have retrenched of late. However, some markets have been more susceptible than others. Markets such as Boston, Florida, Michigan and Nevada are still suffering, and according to Toll, "Phoenix went right into the bucket." That said, there are still markets, such as New York and San Francisco, that are seeing an increase in prices due to their strong regional economies and changing demographics, indicating the geographical nature of the industry.

Larry Mizel from MDC Holdings added that certain markets like Nevada are seen as difficult markets because inventory remains high and demand remains low. According to Toll, the entire food chain, ranging from low-end to high-end markets, is hurting and further price decreases are expected as the sub-prime meltdown spreads to higher-end homes.

According to the panel, the current state of real estate is not due to a land problem, but rather a combination of consumer psychology and oversupply. The media is also playing a role in the housing downturn, with negative comments about the industry that discourage individuals from buying. Mizel indicated that the upward adjustment of condo prices in markets such as Florida will not happen until consumer confidence comes back. "The economy is strong," he said, "but we are dealing with excess inventory and consumer psychology."

For now, it is a buyer's market. Ultimately, most panelists felt, the market will regain traction with a vengeance, and that real estate buyers will face a supply problem similar to countries in the Europe and the UK, where prices are relatively higher than in the United States.

The panel also commented on the decline of the dollar and its favorable effect on foreign investments. Typically, a decline in the dollar makes it less costly for foreigners to invest in U.S. real estate. Historically, foreigners have targeted trophy properties, but lately interest has turned to lower-end properties. It will be interesting to see how a weak dollar will play into the U.S. real estate markets, they agreed.

The near future of the U.S. real estate markets will be dependant on a few factors, namely local economies, consumer psychology, the extent of the adverse affect of sub-prime mortgages and the overall economy. It is hard to predict how various sectors of the real estate will perform, but it will be highly unlikely to see a run-up in prices similar to recent years.

Moderators
Douglas Herzbrun, Global Head of Research, CB Richard Ellis
Speakers
Steven Green, Former U.S. Ambassador to the Republic of Singapore; Managing Director, Greenstreet Partners
Larry Mizel, Chairman of the Board and CEO, MDC Holdings Inc.
Herbert Simon, Co-Chairman of the Board, Simon Property Group Inc.
Robert Toll, Chairman and CEO, Toll Brothers Inc.
3:25 pm - 4:40 pm
In 2005 the National Academy of Sciences released a report titled Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future. The report warned that the United States is losing its competitive edge because of a lack of investment in education and research.

This panel -- including business leaders, scientists and educators -- examined the situation almost 18 months later. Nancy Gransmick, the Maryland state superintendent of schools, co-authored the 2005 report and opened the session with alarming statistics: "Each year United States produces 10,000 fewer engineers than it needs," she said. "By 2010, 90 percent of world's engineers will reside in Asia."

National levels of investment in technology have historically correlated highly with the levels of economic prosperity, and Gransmick noted that in the past 18 months, all major IPOs happened outside of the United States. Could this be an indication that America is starting to feel effects of our underinvestment in technology? She asked the panelists their thoughts. Sally Ride, a former U.S. astronaut and an activist in education in K-12 math and science education, summarized the problem in an eloquent quote from Carl Sagan: "It is suicidal to create a society dependent on science and technology in which hardly anybody knows anything about science and technology." She reminded the audience that although Americans have a highly optimistic view of the nation's abilities, they occasionally get wake-up calls, such as the launch of the Sputnik by the Russians in 1957. "When we take for granted that we have the best innovators, universities and engineers in the world," she said, "we are living off the past."

Ronald Sugar, a CEO of Northrop Grumman Corp., acknowledged that the problem is serious since "industrial capacity is a major factor in national security." As a leader of a major defense contractor, he addressed the difficulties faced by agencies that can only hire U.S. citizen engineers even though there simply are not enough qualified candidates. He agreed that Sputnik was a wake-up call almost 50 years ago, and that although the "20th century was an American century, this position is not guaranteed by tenure." Several audience members also mentioned that a "scientifically literate electorate" is also important so that voters make educated decisions about national security.

Ding-Jo Currie, the president of Coastline Community College, said she found the situation "alarming." The world is changing all around the United States, she said, but in this country, people seem oblivious to the fact. For instance, China has recently increased its investment in research five-fold, to $10 billion, while the United States investment in research is decreasing in both the public and private sectors. She believes that the problem is so far gone that the United States cannot solve it alone and must collaborate with engineers all over the world in order to solve problems it faces today.

Ronald Packard, the founder of K12 Inc., said he remained essentially optimistic about the use of multimedia in classrooms to draw students' attention to science and engineering. The reality is that today′s children and teenagers are surrounded by technology, he argued, and many aspects of technology are considered "cool." His company strives to capitalize on this trend and introduce videos and gaming to classrooms in an attempt to augment traditional techniques and connect math and science to new and exciting careers.

The panelists noted that the report had started an important discussion, but it had not generated decisive action. Gransmick asked whether the panelists envision a next Sputnik-like crisis event in the future, and they agreed that the next crisis would be slow and gradual, not immediately obvious. Sugar, for example, expected to see further bleeding of jobs and a permanent shift in talent overseas, as educated foreigners choose to remain in their own prospering countries. Packard said he anticipated a slow erosion of individual wealth, and Currie drew a medical metaphor, noting although the country is clearly ill, the "symptoms have not reached the masses yet." Corporations are feeling the pain, she added, but they must seek alternative medicine as they are forced to open research and development sites in India and China.

In addition to supporting report′s recommendations, panelists offered several innovative suggestions. On the problem of aging teachers in many schools and colleges, Currey suggested that retiring engineers, such as those working at Northrop, might consider teaching as a second career. And Ride suggested that the problem of climate change could boost to the next generation′s motivation in science education.

Moderators
Nancy Grasmick, State Superintendent of Schools, Maryland Department of Education
Speakers
Ding-Jo Currie, President, Coastline Community College
Ronald Packard, Chairman and Founder, K12 Inc.
Sally Ride, Former NASA Astronaut; President and CEO, Sally Ride Science
Ronald Sugar, Chairman and CEO, Northrop Grumman Corporation
3:25 pm - 4:40 pm
Just as the electronics industry's explosive growth was transformed by transistors and integrated circuits -- eliminating time and space barriers for the communications and information industries -- the transition from institutional-based to capital-markets-based financial services through advances in financial technology have lowered costs, increased returns and expanded access to capital throughout the world. This evolution of finance, in which the commoditization of capital accelerates growth, has expanded entrepreneurial access to financing, creating new markets, new companies and new jobs. This transition, however, has also created challenges of volume and speed of volatility in globalized financial markets. In this session, James McCaughan, CEO of Principal Global Investors LLC, will discuss how this process is changing finance and markets. What are the implications for portfolio management, project financing, retirement security, new sectors and countries entering global capital markets? Attendees are invited to ask questions.
Introduction By
James Barth, Lowder Eminent Scholar in Finance, Auburn University; Senior Fellow, Milken Institute
Speakers
James McCaughan, CEO, Principal Global Investors LLC
3:25 pm - 4:40 pm
When noted author and futurist Alvin Toffler sat down for a conversation with UCLA Professor and Senior Milken Fellow Michael Intriligator, their dialogue highlighted a theme of contrasts.

Toffler's work has always dealt with opposing forces, said Intriligator; his first book, Future Shock (1970) created the genre of future studies by suggesting that too rapid change creates general fatigue and confusion. And his most recent volume, Revolutionary Wealth (2006) discussed the paradoxical notion of the "prosumer," a blending of the marketplace roles of producer and consumer.

Toffler fleshed out the notion by suggesting that two "sectors" exist in the economy -- or what he referred to as two "wealth systems," as opposed to what we more conventionally refer to as "economies." He referred to several ways in which "activities we engage in outside the money economy have an impact on the money economy." For example, Linux, once a powerful competitor to the Windows operating system, was the result of a lone Finnish employee's efforts to improve a less than optimal way of working. The resulting system was added to the public domain and eventually had a profound influence on the "money economy," despite having been born entirely outside it.

Other examples include the shift from paid to personal labor, such as the increased replacement of paid tellers with self-service ATMs, as well as the proliferation of tasks completed by the "productive consumer," such as the homeowner who paints his own house. Toffler suggested that we need to pay more attention to the increasing impact of "prosumers" and encourage their activity. Not doing so, he suggested, would be the equivalent of a physician paying attention to a patient's right lung while entirely ignoring his left one.

Toffler reminded the audience that the advent -- and indeed perhaps the surpassing -- of the knowledge economy compels us to bring as much care and effort to the creation of social change as to technological or technical change. He suggested that despite all the accomplishments of science and technology, the social changes necessary to realize their benefits are still ahead of us and are the more difficult changes to achieve.

He also warned of what he variously called "institutional Katrinas," a "systemic crisis" and "the implosion to come." With regard to those phenomena, he explained that the difficulties of dealing with Hurricane Katrina point to institutional failures of a bureaucracy built two centuries ago, during the Industrial Revolution. Institutional failures of bureaucracy are also found in the battle with terrorism, which pits the U.S. intelligence system, built as a hierarchical and "pyramidal," against the flat, temporary and fast-moving terrorist organizations. Toffler also warned that change will be difficult to implement, noting that "the digits in the digital economy don′t fight you," but that organizational change is bound to elicit uproar and opposition.

In the "old" China, he added, new ideas were discouraged -- and anyone too vocal about them could get fired, which entailed the loss of other vital social privileges. Conversely, the economic system of the old communist regime provided no reward or benefit to the person who did come up with good ideas. In the United States, however, the opposite risk-reward relationship makes possible the proliferation of businesses and innovation, such as has occurred in places like Silicon Valley.

In response to a question from the audience, Toffler also pointed to a potentially more innovative system -- ironically also prevalent in Communist China, as well as Soviet Russia -- in which two separate chains of command successfully co-existed in the military, one reporting up to military leaders and a separate one reporting directly to the Communist party. Without endorsing that specific example, Toffler suggested that the United States needs to think creatively to anticipate and create similar "convergences" and chart a successful path to the future.

A final question from the audience on the rise of "irrational" movements ended the panel where it began by suggesting that too rapid change is creating an even greater need for the stability and "certainty" promised by certain religious, moral and social systems. Toffler used the occasion to suggest that the postmodern movement, introduced in France, is anti-scientific by nature and that our collective human task lies instead in promoting the advance of societies and of democracy.

Interviewers
Michael Intriligator, Professor of Economics, Political Science and Public Policy, University of California, Los Angeles; Senior Fellow, Milken Institute
Speakers
Alvin Toffler, Author, Futurist; Principal, Toffler & Associates
3:25 pm - 4:40 pm
This session discussed recent trends in European financial markets, with a focus on two headline tensions: that between European and U.S. markets, and those within Europe itself.

Moderator John Gapper, a Financial Times editor, began the discussion by asking the panel whether recent U.S. attempts to regulate financial markets, namely the 2002 Sarbanes-Oxley act, had been successful or a "shot in the foot."

Graham Clempson of MidOcean Partners UK, saw an inverse relationship between trends in Europe and the United States. He saw numerous virtues in the European financial system not found in the United States, including: self-regulation; self-policing; light-touch regulation; proportional risk and reward of legal systems. All these policies have come together, along with maturation of markets, to cement Europe as place where innovation and dynamic businesses are rewarded, he said. Although many innovations originated from the United States, Europe has been able to refine these innovations to produce a better model than the US original.

Francois Pages of Calyon Securities, however, argued that Europe, unlike America, was not good at marketing its own success. There was tremendous scepticism in the 1990s about Europe's ability to create a single currency. Yet a decade later, the impact has been fantastic, he said, and Europe is now enjoying the fruits of its monetary innovation. Today the euro's share of global currency is at the same level as the deutschmark's in the 1980s, and it is attracting investment from various central banks.

Although the United States has traditionally produced the innovators of new financial instruments, Europe is now winning market share. For example, the mushrooming of the derivatives market demonstrates European innovation not seen in America. A large driver of this has been the growth of human talent in Europe.

Clempson agreed that there was a genuine two-way flow of innovation between Europe and the United States, illustrated by securitization and sell/lease back, two techniques developed in Europe. A large driver of this innovation is the fact that Europe came of age in a different environment, characterized by the boom of hedge funds and private equity.

John Ong of BNP Paribas said that the euro had accelerated an existing trend of convergence between Europe and the United States in terms of structure and public markets. The story of the next decade is going to be to what extent the United States will fight back. It faces a number of self-imposed limitations, such as the criminalization of inaccurate financial statements, closed borders and restrictions on work visas, all of which detract from its attractiveness and will force it to respond to lighter regulatory environment in Europe.

The strengthening of the pound relative to the dollar is being driven by two factors: the latent pool of European institutional capital that has liberated itself; and the increase in U.S. investors investing in the euro. These factors have created a liquidity wall.

European companies face ongoing difficulties in expanding the United States. The biggest challenge is the initial cost of setting up beach-head businesses, the panellists agreed. Once that is achieved, however, scaling up is easier. The move from the U.S. to Europe is seen as easier. Clean technology is one example of an industry where Europe leads the United States. But in order for Europe to make progress, America has to move beyond rhetoric and make these technologies economically viable. Some element of subsidy is required.

The panel switched to a discussion of intra-European tensions, generally between Eastern and Western Europe. Clempson argued that Europe was still very much one capital market. The euro, he said, has dramatically changed way investors look at the European high-yield market, for example.

But Pages felt that Europe was both a developed and emerging market. When Eastern Europe opened economically in the 1990s, Western Europe had to absorb the shock as well. Further, the deregulation of emerging markets has been very slow, compared to the deregulation in the United States. Meanwhile, the euro zone is still adding states, and there could potentially be a doubling of the number of people using the currency. Companies need to be sensitive about differences between Eastern and Western Europe, Pages noted, and cannot afford to generalise about how whole industries work.

There was a general consensus that London remained the financial capital of Europe. Ong argued that Europe's financial markets have been developed on City of London model. There were threats that if London stayed out of Europe, it would be disaster. Yet London's openness and lack of regulation was a great success. A quarter of a million French citizens now live in London, citizens who could have contributed to Parisian growth. This was seen largely as a protest against heavy European regulation.

That said, financial centres and centers of excellence are taking root developing in other parts of Europe. Switzerland is known to be hub of private banking, and France is considered to lead in innovative derivatives. Clempson pointed out that London faces a constant challenge to find the right balance between light-touch self-regulation and the power to hold poor performers accountable. The cost of living and taxes in London are high, and such factors as these, Pages said, account for the results of a recent survey in which 70 percent of respondents felt Europe did provide an attractive investment environment.

Moderators
John Gapper, Associate Editor and Chief Business Commentator, Financial Times
Speakers
Graham Clempson, European Managing Partner, MidOcean Partners UK
John Ong, Managing Director and Global Head of High Yield, BNP Paribas
François Pagès, CEO, Calyon Securities
3:25 pm - 4:40 pm
Moderator Bachi Karkaria, a consulting editor for The Times of India started the session with the statement that "health is everyone′s individual concern, but health with a capital H seems to be no one's concern."

To address this statement, the diverse panel, representing various policy, vaccine and international health organizations, discussed key issues facing global health today.

The challenge of health system capacity building was a major focus of discussion. Leslie Mancuso, president and CEO of JHPIEGO, stated that there is a clear problem in the lack of human capacity development in developing countries, specifically in their ability to take care of and plan for future public health issues. These include the issues of proper education, research and public health deployment in addressing global health issues.

A clear example of the lack of capacity building both in the United States and abroad is present in nursing schools. U.S. nursing schools are not given enough incentives to train nurses locally, she claimed, and instead poach nurses from other countries, thus taking these skilled workers from countries that also need them. Helene Gayle, president and CEO of CARE USA, pointed out that each country needs to build its own system by working with nurses to give them the proper incentives and resources to stay in their home countries. Mancuso added that countries should retain the health-care talent they have and realize that the nurses don't leave for salary reasons alone. For example, some nurses feel that infection control is important; each developing country must look at its own nurses and their issues, and adapt accordingly.

On the issue of whether single organizations can build the appropriate human capacity or whether a global body would be needed to do so, Seth Berkley, president and CEO of International AIDS Vaccine Initiative, argued that the challenge really is thinking that a global body will solve such problems without having solutions that connect to local needs. He emphasizes that both leadership and health-care models much be local to be effective. Gayle added that a global body, such as the WHO, should support efforts of country-led leadership, but not pose the solutions itself.

With the need of capacity building, moderator Karkaria asked what kinds of innovations both financial and technological, have helped to improve global health. Berkeley discussed the importance of developing new connections between public-private practices and stressed that the innovations should focus on speed and efficiency, and not politics. Getting the appropriate people engaged in the issues, he said, would depend on innovation financing mechanisms.

Sen. William Frist, the only physician in the U.S. Senate, gave an example of a technology innovation that has changed the way HIV is dealt with. In the past, HIV test results took too long to obtain and patients who feared the stigma of the disease would leave before the physicians could discuss their results and treatment options. These days, with rapid and nanotechnology, physicians are able to gain a "teachable moment" and provide results in a short period of time. The new technologies, he said, "revolutionize the capacity issue," as patients, even in developing countries, can get their health results easily.

Mancuso added that similar technology advances have improved cervical cancer treatments in developing countries. The next step, she said, is to scale up these technologies for the populations that need it the most. "Ideally we don′t want to treat," added Berkeley, "we want to prevent."

To put into perspective why global health is important from a business aspect, Sen. Frist illustrated what would happen if the United States had an avian flu (H5NI) pandemic. A three-month pandemic would cut the U.S. economy by $675 billion, which is a 5 percent reduction in GDP.

The panelists concluded with the agreement that all leaders need to look ahead and have a truly long-term vision for the future. Berkeley stated that the challenge is to get a whole health system in place that will be sustainable over time. This system would need to make system-wide changes by working with local leaders to address local issues. Only then will global health head toward an integrated system.

Moderators
Bachi Karkaria, Consulting Editor and Columnist, The Times of India
Speakers
Seth Berkley, President and CEO, International AIDS Vaccine Initiative
William Frist, Former Majority Leader, U.S. Senate
Helene Gayle, President and CEO, CARE USA
Leslie Mancuso, President and CEO, JHPIEGO
3:25 pm - 4:40 pm
The panel represented a cross section of businesses that included venture capital, entrepreneurship and hedge fund firms, as well as a state-owned pension fund, CalPERS.

Winston Hickox of CalPERS, who is also the chair of California Market Advisory Committee, laid the framework for discussion by getting to the core investor fiduciary responsibility, which is to understand, manage and mitigate risk in a sustainable manner. CalPERS and CalSTRS have recognized the opportunity, as well as the need, to invest in the clean technology and sustainable sectors, he said, and have committed more than $1 billion to venture capital and publicly traded equities. These investments are influenced by two externalities: climate change and increasing volatility of energy related commodities.

Hickox also highlighted the awareness in sustainability by pointing to recent headlines from leading magazines such as The Economist, BusinessWeek, and The New York Times.

There was a general consensus among the panel members on the need for sustainable investment. It's also the right thing to do, they agreed. However, each panel member had different opinions as to whether the message has reached mainstream investors.

According to Hewson Baltzell of Innovest Strategic Value Advisors, an international advisory firm, "looking at environmentally sustainable companies is still a niche business." Few major players are actively looking at sustainable investments. The JPMorgan Environmental Index (JENI-C Beta), developed in collaboration between JPMorgan and Innovest, is the first high-grade corporate bond index designed to better educate investors on the environmental and global warming impacts of their investments.

David Blood, who launched his own investment firm, Generation Investment Management, with former Vice President Al Gore, stressed the need for the creation of a common language among investors to integrate sustainability into the investment process. He highlighted the close link between sustainability and good business strategy, and noted that a strategy that integrates sustainability can lead to long-term value creation.

Zachary Karabell, of Fred Alger Management and its Spectra Funds, started off by saying, "Doing well and doing good need not be a trade-off." As the developed world becomes more affluent, sustainable investing will become more mainstream. His fund invests in innovative companies that adopt green practices. Karabell also cited Wal-Mart as an interesting example. Whether the company's work on sustainability is an effort to divert bad press from other unpopular issues or a genuine effort to go green, it has proved a success. And sustainable investing in the long run will lead to convergence of cost structures and better margins.

Rich Kauffman of Good Energies, a company that primarily invests in the solar sector, puts forth a set of questions that may have help determine the sustainability of sustainable investments: Is sustainable investing good for the environment and bad for investors? Is the Internet bust a precedent? Is sustainability a specialized class of investing? What about valuation of intangibles? What about the short side of the market?

The second question -- Is the Internet bust a precedent? -— referred to the dotcom bubble burst in early 2000. Kauffman predicted the possibility of thin-film solar to be the next "bust candidate" from the clean-tech sector. With money pouring into many different technologies, there will be clear winners and losers, he added.

Kauffman also brought up the need to categorize sustainability as a separate asset class will bring increased attention and awareness, and generate additional flow of funds. Valuation is another area where there is a lot to be learned by the investors and rating agencies.

From the venture capitalist's perspective, Diana Propper de Callejon of Expansion Capital noted that the financial returns objective should be closely aligned with environmental and social objectives. The latter are already part of risk-mitigation practices of most companies. Now these will have to be tied specifically to financial objectives. She made a case for venture capitalists in the sector because they are the ones who have a track record of fostering innovations, and large incumbent companies look "outside their walls" for innovations from small companies.

Propper de Callejon asked some key questions regarding the long-term success of many green initiatives: How do we produce more of the same in a sustainable manner? Are there limits to growth in sustainability investing? Are these sustainable solutions scalable, given our limited natural resources? What are the long term effects of striving for sustainability?

The panel members acknowledged the challenges involved in getting these questions answered. In the meantime, any effort to decrease our carbon footprint will help mitigate the harmful environmental effects. One needs to understand the intrinsic value of the environment and the ecosystem in order to address the long-term problems and arrive at sustainable solutions.

Moderators
Winston Hickox, Chair, California Market Advisory Committee
Speakers
Hewson Baltzell, President and Co-Founder, Innovest Strategic Value Advisors
David Blood, Managing Partner, Generation Investment Management U.S. LLP
Zachary Karabell, Executive Vice President, Chief Economist and Portfolio Manager, Fred Alger Management and its Spectra Funds
Richard Kauffman, CEO and President, Good Energies
Diana Propper de Callejon9010937305, General Partner, Expansion Capital Partners LLC
3:25 pm - 4:40 pm
Those seeking to convey the magnitude of China's energy demand have no shortage of staggering statistics from which to draw. As related by the speakers today, China adds electric generating capacity approximately equivalent to the entire United Kingdom every year.

To meet its projected demand, China will likely add an average of about four 500-megawatt power plants every week for the next five years. And while energy statistics abound, so do those regarding environmental cost. Most of that new electricity will come from burning coal, which already leads to premature deaths from pollution numbering in the hundreds of thousands per year. China itself estimates economic losses from environmental degradation and pollution on the order of 10 percent of its GDP. There is no question this poses a challenge of tremendous proportions. To address a problem of this scale, says Douglas Ogden of the Energy Foundation, "It's not a question of 'do we tinker?' We′ve got to do some major leapfrog efforts."

What is to be done? The overriding theme emerging from the four panelists was that new incentive structures must be put in place, and via two primary avenues. First, there must be a price on pollution, says Patrick Jenevein of Tang Energy Group. Arguing that "profitability supports sustainability," Jenevein emphasized the importance of stable contracts and clear ownership of pollution costs as fundamentally important to bringing in clean technology from the private sector. "I'm green because I make money," he stated, but added, "I don′t build wind farms unless I have a contract to sell electricity."

Reinforcing the importance of monetary incentives, Sin Just Wong of SBI E2-Capital Asia Securities Limited, added, "In China ... money drives everything, and the reason why there is no concern for the environment is because there is not enough money there."

Second, the incentives must be realigned at the implementation level to emphasize environmental protection at least as much as economic growth. According to Ogden, while China's central government "gets it" regarding the need for clean and efficient energy, the real challenge is in changing what goes on at the local level. Indeed, Elizabeth Economy of the Council on Foreign Relations pointed out that "looking at any five-year plan (of the central government), one can always find grandiose targets. The targets are never met." This is largely due to corruption and perverse incentives at the local level. In particular, China's local leaders are highly motivated by desires for promotion, which most believe comes from demonstrating economic growth. This will need to change to also take into account environmental factors. Economy also emphasized that it must be accompanied by increased transparency and political reforms that allow true environmental costs to be known publicly, while holding decision-makers at the implementation level more accountable for avoiding environmental problems.

Sin Just Wong argued that there are some slowly emerging signs of hope regarding these changes. Some officials at the local level are now being told that "if you want a promotion, you′d better have a clean town." He claimed there are also signs that the press is gaining increasing freedom to report on environmental issues, though Economy asserted that the freedom is nowhere near complete or sufficient.

Another sign of hope is the tremendous potential for improving energy efficiency, which is the cleanest and usually cheapest method of meeting energy demand. Ogden cited the one case where officials were planning to build a new 350-megawatt power plant but were instead convinced to spend money on increasing efficiency in the region served. By focusing on the demand side, they were able to reduce total electricity requirements by over 350-megawatt at approximately 25 percent of the cost of building a new plant -- and, of course, no increase in pollution.

To close, moderator Perry Wong posed an apt summary question: Will China be able to supply energy to meet its demand, and will it be able to do so while protecting the environment? All were in agreement that the energy will be there, but most believed it would not be clean for some time. Though stated separately, Jenevein and Ogden together provided a concise statement of the only way the latter goal will be met: "It comes down to implementation and enforcement." And: "If you price pollution, it will protect the environment."

Moderators
Perry Wong, Senior Managing Economist, Milken Institute
Speakers
Elizabeth Economy, C.V. Starr Senior Fellow and Director of Asia Studies, Council on Foreign Relations
E. Patrick Jenevein III, President, Tang Energy Group Ltd.
Douglas Ogden, Executive Vice President, Energy Foundation; Director, China Sustainable Energy Program
Sin Just Wong, Chairman and CEO, SBI E2-Capital Asia Securities Ltd.
3:25 pm - 4:40 pm
There is always a lot of discussion about the way high-net-worth families should diversify their investment portfolios. However, little attention is put into how they should tackle real-world issues as they live and conduct business in a global economy.

"A family office is seen as a concierge solving all kinds of issues, from travel needs to private-equity decisions for families with more than $200 million in investable assets," noted moderator Timothy Lappen of the Family Office Group. Outsourced or in-house, a family office needs to address and mitigate all risks that the family members face.

"The most important factor for a family is wealth preservation, more than their asset growth," said Pierre Rolin Strategic Real Estate Advisors. However, the biggest risk in reality is continuity. "There needs to be a continuity plan," noted Linda Bourn of Marsh Inc., "in case anything happens to the family members." The biggest component of continuity is security. Douglas Kane noted that "just being out there, family members have an inherent risk." The family office needs to have up-to-standard security protocols incorporating changes in lifestyle that can avoid family disasters, such as kidnappings and/or robberies. People management (i.e., hiring and firing of service people, investment professionals and others) and a clear understanding of the family's wealth (i.e., the management of their art collection) are crucial factors in mitigating these risks, according to Bourn.

Insurance is not the ultimate solution for global families, but proactive management is, said Kane. "Education is required on the front end. Kidnappings and robberies are not a random act." For example, families put a lot of effort on security when flying private to another country, but they never consider who takes care of their plane when they are on the ground or to keep their flight plans confidential, putting them in a high-risk situation. "If you give the information out, there is no point of a security system," warned Kane, referring to the importance of managing the people and staff around the family. Background checks are the best way to begin.

Computers are also a big threat for high-net-worth companies. Rolin recommended that individuals increase face-to-face meetings, adding that "the less you write, the better." Code names for family members and family plans should also be the norm.

Another risk is "headline risk," which can come through either intentional or unintentional acts. "Confidentiality with the people that surround the family is crucial to avoid headline risk," said Katie Kalvoda of Newport Wealth Management. The liability is enormous, she added, saying that "everybody views you as a very deep pocket." She also said, "The Golden Rule of the family office should always be: never embarrass the company"

However, as people invest money globally, due diligence in other countries becomes complicated. Rolin suggested maintaining association with only blue-chip partners in foreign markets. "You can't create the same due diligence process in Shanghai or Vietnam." The family office needs to understand that in other markets you are no longer with "country club family and friends."

Families going abroad require a partner with a track record in the territory and with the ability to keep the same investment pace. "Partner up with someone who would go bankrupt if your project doesn′t work," suggested Kalvoda. "Start small -- don't go in big-bang," added Kane. Hiring a local staff and/or people with in-country experience is always a good idea.

Transparency also plays an important role in investment. As a family office, "you should always compare your protocols with other investment institutions and maintain a daily communication with your portfolio managers," said Kalvoda. In this area, more than in any other, background checks should be the norm, up to the fifth level of contact.

The panelists agreed on the important role the family office plays in defending the family's name and mitigating the real-world daily issues that all family members face. An infrastructure needs to be developed for a net-worth family to live in today's world, not only in their native country, but around the World, where they travel and do business.

Moderators
Timothy Lappen, Founder and Chairman, Family Office Group, Jeffer, Mangels, Butler & Marmaro LLP
Speakers
Linda Bourn, Managing Director and Family Office Practice Leader, Private Client Services, Marsh Inc.
Katie Kalvoda, Founder and Managing Director, Newport Wealth Management
Douglas Kane, President, Risk Control Strategies
Pierre Rolin, Founder, Chairman and CEO, Strategic Real Estate Advisors Ltd.
3:25 pm - 4:40 pm
After the fall of Berlin wall, noted moderator Peter Passell of the Milken Institute, it appeared to be an undisputed fact that capitalism had achieved worldwide triumph over other political ideologies, and socialism in particular. The success was monumental; some analysts called it the "end of history."

However, as one observes political development in the variety of capitalistic economies around the globe -- Russia, India, Japan and even some in Europe -- one cannot help but notice that not all proclaimed capitalistic nations look and behave the in same way.

In the words of Robert Litan, co-author of Good Capitalism, Bad Capitalism and a vice president at the Ewing Marion Kauffman Foundation, "Capitalism is not monolithic, but it is essential for growth." The book looks at economic growth and how it is affected by four different forms of capitalist regimes: oligarchic, state-guided; big-firm/bureaucratic; and entrepreneurial.

In the oligarchic form of capitalism, the top priority is not national growth, but the augmentation of the wealth and power of the elites. This type of capitalism is evident in Russia and most Latin American and African countries, said Litan.

State-guided capitalism has taken form in such countries as India and those in the Southeast Asia, and can be effective for jump-starting less developed countries; the state-government directs and regulates the economy, picking and choosing areas worth investment and development. The drawback, however, is that the government is the sole decision-maker for such decisions as where to target investment and if those mistakes prove incorrect, the results can be disastrous.

Countries such as Japan and Europe display what is referred to as big-firm/bureaucratic capitalism, Litan explained. Large and stabilized firms and businesses dictate and essentially control the direction of the economy. While this is effective for refining and creating incremental change, it does not allow for the radical innovation that produces significant growth.

However, entrepreneurial capitalism allows for radical innovation that drives growth and ultimately promotes the well-being of society and health of nations. The benefits of this model are seen in such inventions as the air-conditioner, the cell phone and the Internet. The United States is considered to be the model example of this type of capitalism.

Litan acknowledged that these forms of capitalism are not necessarily mutually exclusive. "Entrepreneurial capitalism is largely dependant upon big-firm capitalism for the initial funding and support of projects," he noted. That said, his book encourages the United States to not become complacent but continue to identify ways to stay ahead of the game and use the model to solve greater social problems involving education, health care and pensions.

Panelist Michael Darby, a policy professor at UCLA, said he thought it was "a great book," but he questioned the degree to which cultural differences affected the growth and concept of capitalistic ideals. He also cautioned against characterizing the United States as a dominant entrepreneurial nation, saying that only an estimated 10 percent of industries are growing and the rest of big firms are simply "tagging along."

Andrei Shleifer, a professor of economics at Harvard, cited examples in which each classification model mentioned in Good Capitalism, Bad Capitalism produced growth. "Look around the world," he said, "and you′ll find examples of every kind of capitalism demonstrating growth, some faster than the U.S." He mentioned South Korea and Chile as operating under an oligarch model and Singapore and China operating under the state-guided model. He noted that the book was not incorrect in its assessment that the U.S. economy was strong. "It is apparent that innovation is a part of it (growth), but it is a huge step to say entrepreneurial capitalism is right as the dominant model" and that most states revert back to big-firm and/or state-guided types.

Litan in turn stated that while it is possible to achieve growth under these models, it is the inclusion of "entrepreneurial capitalism that pushes a country over the frontier into an arena of reaching radical innovation, which is the road to the future." He also argued that the deep pockets that exist in Israel and India explain why there is so much potential and why investors are taking a strong interest.

The panel then opened up for audience questions, some of which concerned the conditions and catalysts by which entrepreneurial capitalism flourishes.

Litan stated four catalysts and essential conditions for entrepreneurial capitalism to flourish: (1) low barriers for entering the market; (2) incentives for people to grow their business, such as low taxes; (3) disincentives for rent-seekers and instead a push to keep the market competitive; and (4) luck, as it pertains to timing and consumer demand.

Shleifer disagreed and stated he believed the influx in entrepreneurialism to be a result of "reduced trade barriers and tax, increase in capital flows, reduction in regulation and privatization."

With respect to an audience question about intellectual property, Michael Klein pf the World Bank Group/International Finance Corporation (IFC), argued that this was one of the key topics of the future, "Since information is more readily available, it is harder to protect," he said and noted that a whole new set of issues pertaining to intellectual property and biotechnology are currently arising. He also discussed how issues such as health care and pensions will dominate the future and stated that these cannot be left to the markets.

While the panelists essentially agreed that there were differing shades of capitalism, there was disagreement between the audience and panel as to how effective entrepreneurial capitalism will be in solving the problems of our future and how sustainable it will be as a long-term model.

Moderators
Peter Passell, Editor, Milken Institute Review
Speakers
Michael Darby, Professor of Policy, Director of the John M. Olin Center for Policy, Anderson School of Management, University of California, Los Angeles
Michael Klein, Vice President, Financial and Private Sector Development, World Bank Group/International Finance Corporation (IFC)
Robert Litan, Vice President, Research and Policy, Ewing Marion Kauffman Foundation
Andrei Shleifer, Professor of Economics, Harvard University
4:45 pm - 5:15 pm
4:50 pm - 6:00 pm
With the clean-tech sector experiencing an investment infusion of more than $60 billion in 2006, moderator Northon Melo of Calyon Securities led his panel in a discussion of energy investment. The panelists stressed the importance of remaining sober about valuations while continuing to place large bets on the future of the clean-tech sector.

Media frenzy, strong consumer demand for clean energy and overall demand from a booming Chinese market were all cited as helping to drive up the valuations of clean-tech companies, but the panelists universally acknowledged that emerging technology investments have always been risky and that in many ways, this cycle was no different.

"I live about 20 miles from the sight where gold was first discovered in California," said Chris Ailman of CalSTRS, which has invested in a handful of venture capital and private-equity funds that focus on clean technologies, "and the hills are littered with mines that were put on land sold for high prices because people thought there was gold there -- and, of course, there wasn't." The clean-tech sector, he noted, "is a high-risk area, but investors know this, and I think, despite all the focus, you're still seeing relatively gradual movement into the space."

Panelists also emphasized the need for governments to strengthen their policy commitments in the sector and remain consistent with their support, as investment horizons will typically range between three and 10 years.

"It is important to not look at this as just an infrastructure investment," said Rodrigo Prudencio of Nth Power, "but also to look at this from a government framework." He noted that the last massive wave of clean-tech investment, during the late 1990 and early part of this decade, came against the backdrop of anticipated utilities deregulation across the country. When the deregulation never occurred, investors were left holding bad hands.

"Clarity and a long-term commitment are extremely important," he added. "Across the board, the most important thing for the United States to do is start setting a direction and harmonizing with the rest of the world. That would help investors feel comfortable that this is a place where they can be over the long term."

Panelists noted that the increasing interest in the sector has had a positive impact because it has increased the quality of the entrepreneurs starting companies, spurred more consumer demand and increased the amount of capital available for investment. "Entrepreneurs are coming to us from more different industries and companies than they ever have," said Raj Atluru, a partner with Draper Fisher Jurvetson. "Furthermore, there is a broader definition of what can work in clean tech, and VCs have a better understanding and a broader definition of the opportunities, so investment decisions are more sophisticated than they have ever been."

The panelists cited successes in Europe as cause for optimism. Across the Atlantic, the industry is more mature, with institutional investors more comfortable placing funds, and private-equity money flowing into clean-tech buyouts, as opposed to earlier-stage venture investments in the United States. Ailman highlighted his counterparts in Dutch public investment pools as pioneers in making clean-tech investments.

Overall the mood was optimistic that capital would continue to energize the sector, spur innovation and lead to improvements in the way the world consumes energy. "I challenge you to picture the L.A. freeways in 2020," said Ailman. "Do you really think the Shell station will look the same as it does today? We don't. Technology and demand shifts are going to make such impacts that there will be great investment opportunities, and I just want to get in front of them."

Moderators
Northon Melo, Director, Cleantech Practice, Calyon Securities
Speakers
Christopher Ailman, Chief Investment Officer, California State Teachers' Retirement System (CalSTRS)
Raj Atluru, Managing Director, Draper Fisher Jurvetson
Martin Eberhard, Co-Founder and CEO, Tesla Motors
David Pearce, President and CEO, Miasol
Rodrigo Prudencio, Partner, Nth Power
4:50 pm - 6:00 pm
Every city and organization has someone who clearly stands above the rest. These successful individuals are not defined by their wealth, power or occupation. As a matter of fact, other individuals may have the same outward accomplishments, but there will be a distinct difference between them. Thus, USC law professor Susan Estrich began the session by posing the question, "What makes a person big?"

Panelist Eli Broad of the Broad Foundation identified three principles that had allowed him to transition from owner of two companies to "Mr. Big," as Estrich affectionately called him. Broad noted that he would "go out looking for opportunities, improve things that already existed and start things that didn't exist." These led to the development of numerous opportunities, such as the Broad Foundation, the Broad Prize, the Broad Institute and the Broad Contemporary Art Museum.

"I had a genetic need to give back, and I wasn't defined by my work," said Sherry Lansing, the former CEO of Paramount Pictures. "At age 12, I began watching people I admired because of what they gave back to the world. They used their wealth to try to make the world a better place. I always had a plan. I said that if I was lucky enough to have my dreams come true, I wanted to start a foundation at 60." As the first woman to head a major studio, Lansing fits any measure of success. After more than 10 years at Paramount, she retired and created the Sherry Lansing Foundation, which is dedicated to raising funds and awareness for cancer research. Although some were skeptical about her leaving, she noted that she was "rewired not retired." Fueled by her passion for education as a former math teacher, and her interest in cancer as a result of her mother's cancer-related death, Lansing said she is as happy today as ever. "I'm growing every day and feel younger every day. I have new friends and I'm learning new things."

"If you have a sneaky suspicion that you're wasting your life, you probably are," said Jane Kaczmarek, who added that she felt this way until she began working with children's charities. As a popular television and big-screen actress and the wife of a famous actor, her life would be envied by many. It wasn't until she founded Clothes Off Our Back, which auctions celebrity clothing for children's charities, that she truly began to understand the meaning of service. She stated that celebrity life didn't compare "to the feeling you get when you've immunized kids in Africa or repaired a cleft palate in India."

Panelist Elizabeth Kanna, a business transformation consultant and co-founder of Dream In You, noted the common theme in the panelists' stories: passion. All spoke of being passionate about the work that they do. This passion calmed their fears, wouldn't allow them to give up, wouldn't allow them to stay in their prior jobs and led them to question the status quo. Kanna suggested that one look for clues to ascertain what he/she is passionate about. More specifically, she said, ask yourself: if money were not an issue, what would you do? Next, she suggested, develop a personal brand/story. Also, identify and develop your skills set. Although more is needed, these are the first steps towards having life after business success.

Although the panelists may seem to work in areas completely different from their prior careers, Lansing identified principles that were important in her career at Paramount and now working in her foundation: if something doesn′t, work fix it. If everybody hates your idea, it's probably a good one. Build consensus.

Even though it may have been comfortable for the panelists to remain in their careers, it was scarier for them to stay, they agreed. Many expressed joy in the growth and learning opportunities afforded by their new jobs. Working on issues, such as education and medicine, has necessitated a new sense of patience not experienced before in the business arena. But Broad warned against accepting the pace at which the status quo is changed. "Don't be too patient," he said. "Patience may not be a virtue."

Many people think you need to be rich in order to do philanthropy, but according to these panelists, that's not true. Perhaps Lansing summarized it best, saying, "it's not about money, it's about ideas, passion, commitment and time. If you′re willing to give that, you can make the world a better place."

Moderators
Susan Estrich, Robert Kingsley Professor of Law and Political Science, University of Southern California Law School
Speakers
Eli Broad, Founder, The Broad Foundation; Founder-Chairman, KB Home and AIG Retirement Services Inc.
Jane Kaczmarek, Actress; Co-Founder, Clothes Off Our Back Foundation
Elizabeth Kanna, Business Transformation Consultant; Co-Founder, Dream In You
Sherry Lansing, CEO, Sherry Lansing Foundation
4:50 pm - 6:00 pm
Rules are rewritten all the time, and marketing is in the midst of major rewrite, yet its fundamental principles remain strong, according to this panel moderated by Reed Hundt, former chairman of the Federal Communications Commission.

Recent research indicates 78 percent of Americans use the Internet, while only 5 percent to 10 percent actually listen to broadcast media commercials. Coupled with the explosive growth in electronic media options, the interactive capacity of the Internet allows consumers to select their preferred media and interact with companies, other consumers and third parties (e.g., government) who influence purchase decisions. Today's successful companies embrace these new opportunities with inclusion of marketing at the earliest stages of product development and an interactive, multimedia approach that both "pushes" information and enables consumers to "pull" information they desire. Successful companies capitalizing on this consumer willingness to express preferences through "pull" content selection, e-mail and weblogs (blogs) can monitor the buzz for consumer feedback. But they know the competition is listening, as well.

The panel cautioned that exciting opportunities do not overshadow fundamental principles like truth in advertising and the importance of branding as a form of trust in the efficacy and consistency of a product. The amazing speed and interactive nature of today's market creates harsh consequences for misrepresented products. "The foundation of every marketing strategy must be the truth," this panel warns.

Leading off the discussion was Lynda Resnick of Roll International Corp. Whether discussing her Teleflora.com, Fiji Water, POM Wonderful or pistachios, she said she thinks "multimedia" at every turn from the 1,200 events her companies sponsor each year, from billboards, celebrity endorsements and active internet content to product placement in movies and "guerilla tactics" like college campus poster campaigns with multiple messages targeting biology, say, or art students. When asked how best to brand on the Internet, she said, "Buying key words on the Internet is the most important thing you can do." She went on to explain the importance of ensuring your message is on the first page of search engines, whether you use a smart selection of key words or paid advertising.

Trever Kaufman of Schematic noted his clients are "looking to create more than a message, to include the product itself." His display stepped the audience through his company's work with Electronic Arts to integrate live ESPN streaming video into the latest edition of the popular Madden NFL 08 video game. "Stop talking about the Internet as a medium," he said. "The interface is the battleground for advertising when the Internet is integrated into IPODs, video games and cable television."

Peter Arnell of the Arnell Group took these thoughts one step further by demonstrating how early involvement in product development can revolutionize something as mundane yet important as the home fire extinguisher. Market research revealed that 87 percent of all home fires start in the kitchen yet most kitchens lack a readily available or easy-to-use fire extinguisher. Current products are ugly and overly complicated. To capture this market, his firm invested in product development with Home Depot and a manufacturer to produce an aesthetically appealing, simpler kitchen fire extinguisher with an active communications interface to the home's other safety systems. Drawing on the analogy of Braun's successful introduction of a "pretty" coffee machine, this effort was designed from the outset to "focus on the medium, build the message from the 'front end' and make it integral to the product." Arnell noted this was possible because his marketing firm "actually invests in the product rather than provide a service," making it an integral part of the product development and sharing the development risks with the other key partners.

Drawing on the way products were marketed prior to broadcast media, Peter Maslen of Knowledge Universe Education noted that "everything is the same again. We can talk to consumers and they can talk with us, just like the days before radio and television." Broadcast media provided no real conversation opportunities. But today's mosaic of media options and the Internet allow us to carry on a two-way conversation with consumers that benefits both parties and is essential to building consumer trust in products.

"Yesterday we believed," said Maslen. "Today we question. We no longer trust." He reminded the audience that "we build brands around an experience" and the more powerful an experience, the more that brand will be trusted (or distrusted). Thus, successful companies reinforce a good experience at every opportunity, with Starbucks perhaps the best example. Starbucks has never advertised on television but has emphasized that the brand is a trusted mark, and that its stores and employees are an integral part of the community --"a lounge away from home, where friends and business could meet."

Switching to international markets, Maslen cautioned that while Americans take branding for granted, it is extremely important aspect of marketing internationally. Similar levels of trust do not exist in places like Asia and Africa, simply because similar levels of product efficacy and consistency do not exist. Consumers in these regions are taught to distrust products, so to succeed in these markets requires truth and maintaining high levels of efficacy and consistency. Earn brand trust in these markets, and you have a tremendous advantage over your competition.

The issue of print media brought more frowns than solutions. All the panelists agreed that the situation is unclear. Print media is in a state of decline and facing fundamental questions on defining the business process as editorial content, news or something else. What that "something else" is may be unclear at present, though Kaufman noted that "our patience is becoming irrationally short" in terms of our appetite for news. Arnell suggested that it may take "20 years to figure out what follows the newspaper," and Resnick said she saw an industry struggling with the consolidation of retailers and new-media options that depress demand and, as a result, print advertising revenue. While all agreed they read print media less than in years past, the roadmap for how newspapers transform in the years ahead appears yet to be written.

The growth in media outlets truly allows consumers to pick and choose the media they desire and selectively tune out what they choose to ignore, the panelists agreed. Billboards and broadcast media will remain a staple for they "push a message to consumers, but time when only "push" media sufficed has long since passed. Today's consumer demands a two-way communication strategy, and it will not be long until that demand is an international standard as well.

Moderators
Reed Hundt, Advisor, McKinsey & Company; former Chairman, Federal Communications Commission
Speakers
Peter Arnell, Founder and Chief Creative Officer, Arnell Group
Trevor Kaufman, CEO, Schematic
Peter Maslen, CEO, Knowledge Universe Education
Lynda Resnick, Co-Chairman, Roll International Corporation
4:50 pm - 6:00 pm
There is a shortage of qualified science and math teachers in the United States; only 1 percent of college degrees are science degrees, and experts predict that "within five years, 90 percent of the world's scientists and mathematicians will live in Asia." This is a strategic national disadvantage and a threat to economic performance.

Opinions diverged on how the crisis should be tackled. Federal standards and standardized tests were proposed as remedy, but so were less regulation and decentralized decision-making with respect to budgets. All panelists agreed, however, that "science has been ignored" in policy making, and that that is a luxury that the U.S. school system can no longer afford.

According to Thomas Boysen of K12 Inc., the gravity of the problem is illustrated by the fact that "virtually no improvement has been made ... over the last 30 years." One of the major structural issues with science in K-12, he said, is the fact that it is excluded from standardized tests. "If you have a performance standard and you measure it, people will get it." There must be a coherent strategy to reform the entire system, with substantial investment and the option of letting market forces determine prices for science teachers, he added. Panelists agreed that there is a disincentive for scientists to teach because private-sector salaries are more attractive.

Cindy Moss, a science curriculum specialist, supported Boysen in his assessment that recruitment is the biggest issue. "The starting salary is $29,000," she explained. And while a survey of 15-year-old students from 35 countries showed that they overwhelmingly take science classes before graduating from high school, the United States is the only country where this pattern does not hold. "This is a national crisis," Moss warned.

She outlined two approaches to address the problem: One option is to let the market determine teachers' wages, which would signify a substantially higher salary for science teachers than other teachers. The other approach would be to introduce national science standards, similar to those in reading and math assessments. This would also alleviate some of the issues that teachers face when moving across state borders: in certain states teachers must pay up to $1,000 for a test that determines their eligibility to teach, regardless of how long they have taught in another state.

Jeanne Allen of the Center for Education Reform refuted the argument for federal standards. Instead, she argued, the way to address the problem is to redirect control to individual schools. Teachers, not just students, ought to be evaluated, and there need to be guidelines on classroom content, not just results. "Not everyone who knows science knows how to teach," she said. High-quality products are out there; there is no reason why teachers should not get reimbursed for state-of-the-art teaching materials. But federal guidelines work against this. Competition in the market for education would ensure high-quality teaching, just as it ensures quality in other private markets. Thus there should be room for individual schools, rather than districts or states, to make budget decisions.

There ought to be "no exceptions for background," including ethnicity, parental income and disability when it comes to standards, argued Gerald Zahorchak, Pennsylvania's secretary of education. Acknowledging attainment gaps in practice, he posed the question: "What do we do when students struggle?" Teachers need to be guided on best practices and concepts as they play the key role in the system, he argued. The best economic strategy is to "invest in young people." But privatization and individual school budget decisions are not the solution, he said. There need to be guidelines to ensure quality standards.

Responding to an inquiry from the audience, the panelists discussed the role that private business can play in improving the situation. Zahorchak mentioned an example from Pennsylvania whereby businesses offer cash incentives for taking science courses. Another way would be to offer summer internships, argued Moss. Business executives are trained in leadership, a skill that many principals lack, she charged, and interaction between the two sectors could bridge the gap. Boysen added that the business community could also help with public awareness. If businesses are more vocal in requesting scientists, they could "energize the political system."

Moderators
Susan Wolford, Managing Director and Group Head, Business and Educational Services, BMO Capital Markets
Speakers
Jeanne Allen, Founder and President, Center for Education Reform
Thomas Boysen, Senior Vice President, Classroom Solutions, K12 Inc.
Cindy Moss, K-12 Science Curriculum Specialist, Charlotte-Mecklenburg Schools
Gerald Zahorchak, Secretary of Education, Commonwealth of Pennsylvania
5:00 pm - 6:00 pm
This session is by "invitation only" and is limited to invited guests. If you are interested in attending, please send an e-mail request to jmeehan@milkeninstitute.org.
6:00 pm - 7:00 pm
This private reception is reserved for conference speakers and sponsors only.
6:00 pm - 7:00 pm
This session is by "invitation only" and is limited to invited guests. If you are interested in attending, please send an e-mail request to jmeehan@milkeninstitute.org.
6:00 pm - 7:00 pm
This session is by "invitation only" and is limited to invited guests. If you are interested in attending, please send an e-mail request to jmeehan@milkeninstitute.org.
6:00 pm - 7:00 pm
6:15 pm - 6:45 pm
7:15 pm - 9:00 pm

Moderator Michael Milken started off the discussion with a few key facts: Each year more than $260 billion is raised for philanthropic causes in the United States. Most of this money comes from individuals, not institutions. Add to this another $20 billion donated by corporations, and philanthropy comprises around 2 percent of GNP, excluding giving in terms of volunteering time.

In this context, Milken led three celebrated philanthropists -- Andre Agassi, Michael J. Fox, and Ted Turner -- in offering their perspectives on this vital sector of our society.

All three panelists had compelling motivations for their start in the charity arena. Michael J Fox, who has suffered from Parkinson′s disease since age 29, bluntly stated, "I didn′t volunteer, I was recruited." Although he kept his condition private for years, once he disclosed his illness, he realized he was part of a much larger community. From that realization, he "felt a responsibility to channel that energy and help the promise meet the reality, the money meet the science."

Similarly, Andre Agassi turned his own experience with the educational system in his native Las Vegas into a desire to improve the school system there. He began to get involved with local charities, he said, "but at the end of the day, I realized I was sticking Band-Aids on issues." He felt that he needed to get more involved with the learning process itself and created the Andre Agassi College Preparatory Academy, a K-12 school for children in one of the city's most challenged neighborhoods.

Ted Turner's passion has always been building connections with other people and nations. In response to the U.S. and Soviet boycotts of each other's Olympic Games, he founded the Goodwill Games in Moscow in 1986, bringing the people of these two nations closer. Turner again got involved international affairs in 1997 by giving $1 billion to the United Nations and by asking other wealthy citizens for their donations, as well. His heart seems to be in issues that are larger than life, yet he finds ways to bring them to the forefront and make them a reality.

Another theme that resonated with the panelists was looking toward the future. Each has set out ambitious goals. For example, Fox said he hopes he can help "to cure the disease." Agassi said he hopes his academy can become a model blueprint for similar schools around the country, and possibly in elsewhere around the world. Turner's goals are large: improving the role of women in society and working quickly to heal the environment (something he′s been passionate about for decades).

Milken noted encouragingly that we may be the first generation to see cure a disease in our lifetime. Fox responded by acknowledging that the late actor Christopher Reeves was his role model and had taught him that hope is based on knowledge and that, in contrast with optimism, "hope is informed." In the past, he said, America had the vision, but not the technology. "Now we have the technology," he said, "but not the vision."

In terms of their overall philosophy, Agassi explained that he had brought over some of the lessons from tennis to the world of charity. In both areas, he said, you should "use each day as an opportunity to get one day better." And Turner said he has learned in philanthropy, as in business, that change comes through people helping each other.

On broader issues like the end of nuclear proliferation and finding the right people to help their foundations. Turner mused that "if we can survive the next 50 years we′ll make it -- we′ll be here till the sun goes out." And Fox added that people should get involved for the right reasons.

Moderators
Michael Milken, Chairman, Milken Institute; Chairman, FasterCures / The Center for Accelerating Medical Solutions
Introduction By
Michael Klowden, President and CEO, Milken Institute
Speakers
Andre Agassi, Winner of more than 60 professional tennis titles; Founder, Andre Agassi Charitable Foundation
Michael J. Fox, Founder, The Michael J. Fox Foundation for Parkinson's Research
Ted Turner, Chairman, United Nations Foundation
9:30 pm - 10:30 pm
This session is by "invitation only" and is limited to invited guests. If you are interested in attending, please send an e-mail request to jmeehan@milkeninstitute.org.
Introduction By
Ulrich Schmid-Maybach, Founder, Maybach Family Foundation
Speakers
Eric Garcetti, President, Los Angeles City Council
Kenneth Mehlman, Partner, Akin Gump Strauss Hauer & Feld LLP; former Chairman, Republican National Committee
Tuesday, April 24, 2007
6:30 am - 7:45 am
What are the most effective ways to combine public investment with corporate and individual philanthropy to secure progress in a rapidly development country? In this panel, a group of experts in the field of large-scale philanthropy will focus on Vietnam as a case study in how to do just that. Members of the audience are invited to brainstorm with these experts to find ways to build effective philanthropy in these developing nations.
Moderators
Perry Wong, Senior Managing Economist, Milken Institute
Speakers
John Anner, Executive Director, East Meets West Foundation
Robert Davies, CEO, International Business Leaders Forum
Man Phan, Manager, Business Development, Carrier Johnson
6:30 am - 8:30 pm
6:30 am - 7:45 am
This session is by "invitation only" and is limited to invited guests. If you are interested in attending, please send an e-mail request to jmeehan@milkeninstitute.org.
6:30 am - 9:00 am
6:30 am - 7:45 am
This session is by "invitation only" and is limited to invited guests. If you are interested in attending, please send an e-mail request to jmeehan@milkeninstitute.org.
6:30 am - 7:45 am
Moderators
Richard Elden, Principal, Lakeview Investment Manager LLC
7:55 am - 9:15 am
"Our long-term fiscal picture is not pretty." This somber view of the U.S. economy, uttered by Director Peter Orszag of the Congressional Budget Office, was not shared universally by other panelists, who presented contrasting views and perspectives. In the course of the session, they did, however, generally agree that the U.S. economy was steady, and would not be extremely vibrant or bleak in the near term. In fact, "not too hot, not too cold" appropriately captured what Americans can expect in the coming quarters, years, and decades.

The panelists also included a CEO of the largest U.S. mortgage company (Angelo Mozilo); an industrial economist/managing partner of a notable financial services firm (Andrew Rosenfield); a economist/banker (Brian Fabbri); a moderator Steve Forbes. Their unique viewpoints, such as how they framed the economy in terms micro versus macro factors or a long-term versus short-term considerations, produced varied accounts of what has occurred and what one can expect.

"The U.S. economy is entering into a serious correction period," warned Fabbri, stating that the economy would not return to the levels of GDP productivity it had experienced in previous years. Highlighting such harsh realities as the slumping of domestic assets prices, rising housing delinquencies, stricter regulations for lending, reduced investment in real estate, the decline in overall consumption, slowed consumer spending, a decline in housing starts and the fact that 20 percent of disposable personal income is going to debt services, Fabbri painted a grim outlook of slowed growth and economic hardship that Americans can expect in the near term.

"I hope it's true," Mozilo exclaimed after listening to Fabbri, "because that would cause the Federal Reserve to lower interest rates, which is always good for us!" This half-joking, half-serious remark underscored the fact that the health of the economy truly is in the eye of the beholder. Mozilo advised the audience that the housing market is not as bad as it may seem, projecting that only about 5 percent of domestic homeowners would enter into foreclosure. And although housing values continue to slip and people continue to leverage themselves, Mozilo noted that 81 percent of homeowners continue to make their payments on time.

"The bigger the gap that exists between people who own homes and those that don't and can't, the bigger the social problems will be," stated Mozilo. The fact that so many Americans now own their own homes is indicative of the strength of the U.S. economy, he maintained but added that Congress has tightened restrictions and regulations that have "changed the rules in the middle of the game" for homeowners and may have drastic effects in the long term.

Speaking on behalf of the Congressional Budget Office and putting Mozilo's comments into a macroeconomic perspective, Orszag asserted that "the biggest thing we need to fear from the housing sector is that it may spread fear itself," and that the housing sector will not affect the greater economy significantly unless people lose consumer confidence. Orszag agreed with Fabbri that GDP growth likely will slow to around 2 percent but predicted that the country will avoid a complete recession. He attributed this economic slowdown to rising health-care costs.

"The biggest long-term fiscal problem we face," he said, "is health care, not aging." Currently the United States spends 4.5 percent of GDP on Medicare and Medicaid costs. Unless these costs are reined in, by 2020, he warned, that number will rise to 20 percent, which would be larger than the entire current federal budget. Orszag was optimistic that the country can achieve this, assuring the audience that "there is a variety of evidence suggesting we can take costs out of the (health-care) equation without impairing the health of Americans."

Presenting a brighter view of the fiscal outlook, Rosenfield argued that the United States currently maintains a staggering $678 trillion in capital stock, $600 trillion of which is human capital that has yet to be fulfilled. He added that growth is driven by scalability of human capital, an asset that the nation is rich in. "Our investment in higher education dwarfs other countries," he said, and he urged the panelists and audience not to view the economy in terms of the next few quarters, but rather in the next few years and decades. Looking over 20 or 30, he predicted, GDP growth will be above 3 percent, driven by technology and human knowledge. "Knowledge," he added, "is a non-rival, non-excludable good. It spreads widely."

However, moderator Forbes wondered whether 2 percent to 3 percent growth was even adequate, considering that China's economy is growing at 10 percent to 11 percent annual, and with India not far behind. Fabbri shared his concern, adding that the U.S. trade deficit has reached a staggering 6 percent and warning that "we slow down and they keep growing, and when that happens, there will be a shift in asset investment away from U.S." Orszag concurred, saying, "It is very unusual for the world's largest economic power to be in this position."

Despite all these weaknesses, Forbes reassured the audience of U.S. economic strength, speaking specifically to the impressive $28 trillion of net assets that exist on the nationwide, aggregated personal balance sheets.

With impressive numbers like these, Forbes asked, "Why is the mood in the U.S. so somber and sour?" Panelist answers included the Iraq war, income inequality, lack of social safety nets and health care and the looming presence of the Asian tigers.

So how hot or cold is the U.S. economy? As this panel illustrated, it depends who you ask. Regardless of the actual temperature of the U.S. economy, Forbes left the audience with a calming piece of advice: "Eventually we get through these things and we are stronger for it."

Moderators
Steve Forbes, President and CEO, Forbes Inc.; Editor-in-Chief, Forbes
Speakers
Brian Fabbri, Chief U.S. Economist for North America, BNP Paribas
Angelo Mozilo, Chairman and CEO, Countrywide Financial Corporation
Peter Orszag, Director, Congressional Budget Office
Andrew Rosenfield, Managing Partner, Guggenheim Partners LLC; Founder, President and CEO, Leaf Group LLC
9:25 am - 10:40 am
According to moderator Robert Lessin of Jefferies & Company, the investment environment used to be simple. If it was a leveraged deal with capital, you sent it to a private equity firm like Apollo. If you needed instant liquidity, you sent it to an investment management firm like Capital. If you required downside protection, you sent it to a diversified financial services firm like Guggenheim.

These divisions are becoming less distinct, he said, and some feel that the business is becoming commoditized. Customer preferences have changed, and firms are reacting accordingly. This panel explored if, how and why these changes are taking place.

Gregory Fuss of The Capital Group Companies explained that consumer stock preferences have changed. He argued that investors wanted stability after the 2000-2002 crash and shifted to more conservative management. Clients now want increased liquidity, both to pay bills and to ensure a quick exit strategy. In essence, according to Fuss, people now want a stability that they did not previously prioritize.

Andrew Rosenfield of Guggenheim Partners agreed, noting that "the provision of liquidity is a great source of return" and that "people really treat losses different than gains. They treat a dollar of loss as twice as bad as a dollar of gain." This means you need to use assets imaginatively to get higher returns that are less loss-prone. Returns are then more "psychologically appropriate" for current clients.

Perhaps partly as a reaction to these changing preferences, Lessin said, some hedge funds appear to be getting more into the private equity business with longer lockup periods. Michael Keough of Stark Investments agreed that this might be the case, but only with a global mindset. He added that "you should be indifferent to the business model because it is in the investor's best interest to think that way."

Rosenfield argued that firms should stick to their core competencies and that the convergence question should be looked at as a talent problem. "You don′t get paid for creating diversification when your customers can create it themselves," he said. This movement toward conversion is really a movement driven by human capital and expertise. He concluded, "There′s a lot of money searching for a very small amount of talent."

Leon Black of Apollo Advisors added that private equity covers a lot of different areas today and has been expanding to an array of products for the past five years. "From the get-go, (Apollo's) view always was to look at a balance sheet and decide where was the best risk/reward" he said. Sometimes it was controlling the company, sometimes it was higher up in the capital structure. "Private equity today, and what we try to do, is to have this integrated platform -- we have no Chinese walls in our private equity business." But he added, Apollo tends to stick to industries with which it feels comfortable. "We do it around industry verticals where we think we have real expertise."

Fuss added a different perspective. Capital Group is not in the hedge fund business and does not want to be. Fuss said that this is for three primary reasons: First, the firm couldn′t figure out the conflicts of interest. Second, it is a fundamentally different skill set to short stocks. Capital has a distinct culture and would have had to look outside the firm for the relevant talent. Third and possibly most important, Capital has typically been voted the best buy-side firm by the executives of the companies they follow. They want to preserve this relationship, and the dynamic introduced by possibly shorting stocks could harm this.

Another industry trend that is often talked about in the media is the possibility of many private equity firms going public. Fuss answered the question "why Capital Group will never go public" by saying that the firm prefers to have the freedom to do what it thinks is right, and to "spend their own money doing it." Sometimes, this means doing things that are very out of the mainstream at the time, and thus could be against the market.

According to Black, whose Apollo Associates is often rumored to be going public, "The real issue is looking at it as you look at everything. Is there really a strategic reason to do it? There are real positives, and there are some real negatives." He added that "certainly, having an outlet to eventually monetize for the founders and senior partners is a plus." Going public gives you a currency that can be helpful for industry investment and attracting top talent to your firm. On the other hand, the minuses are also compelling. Being public, you are under the microscope of compliance, you are in the fishbowl, and you have "shareholders coming out of the woodwork that can sue you."

Black thinks that "right now a lot of firms are certainly considering it (going public) seriously, and one question is, 'Is this a window, or is it something that will become the norm over time?' I go back and forth. He added that "once you really have diversified streams of cash flow that are stable and constant and of size, they ought to be able to be monetized," and this is a trend that will continue. On the other hand, if liquidity dries up, maybe this will prove to be a window.

Other topics covered included carbon footprints and "charitable footprints." Most panelists felt that carbon emissions and offsets will become an issue in valuing companies, but that there is not yet much activity on this front.

Charitable footprints generally take the form of individual asset managers investing in social ventures or making charitable contributions form their earnings. The question of whether contributions on a private scale make sense or whether investment firms should begin to cultivate a charitable presence as part of their branding was debated. Fuss said that Capital Group's partners are quite active on this front "behind the scenes," but that the company is unlikely to ever be public about these efforts (especially considering the firm′s preference for privacy).

Black said he encourages his partners to get involved and contribute to things they are interested in, and follows this advice himself. But, he argued, charitable giving is most appropriately done by the individual asset managers and the LPs, rather than by aggregating some portion of the firms fees or returns and donating that. Rosenfield agreed but added that there is an important element of leadership in charitable giving that managing partners should demonstrate.

The panel concluded with an issue of concern for all managers of investment firms. "The most dangerous words I've ever heard in the financial community," said Lessin, "are, 'It's different this time.' Is it different this time?"

Black suggested that "every time is different, but clearly we go through cycles. The question is, how long will these cycles be?" Returns will come down eventually, but right now, he said, "Interest rates are pretty comfortable, inflation seems to be pretty much under control, employment numbers are great, the economy is still chugging along. There is a lot of debt, but as percentage of GDP, it is not alarming. There is an astounding amount of global liquidity that is real." If something causes this cycle to downturn, Black said, it would be due to an unpredictable geopolitical event. He concluded that "it doesn′t feel to me that it's about to fall off a cliff, subject to the geopolitical risks."

Keough added that "as a global multi-asset manager, I agree with Leon, it looks great." He said that "the global liquidity is forcing asset managers to think about their business differently" and that "there is distress out there -- it's just maybe not as widespread as it was in 2003."

Rosenfield pointed out that the disparity between wealthy and poorer nations is 37-1 and can't persist. He predicted poorer countries will see much more rapid growth. This means that, in some sense, the United States will not do as well, in terms of growth rates, as some other countries. But, according to Rosenfield, this is a good thing.

Moderators
Robert Lessin, Vice Chairman, Jefferies & Company
Speakers
Leon Black, Founding Partner, Apollo Advisors LP
Gregory Fuss, Senior Vice President, The Capital Group Companies
Michael Keough, Principal, Stark Investments
Andrew Rosenfield, Managing Partner, Guggenheim Partners LLC; Founder, President and CEO, Leaf Group LLC
9:25 am - 10:40 am
How are energy companies responding to the growing need for new and updated energy infrastructure to deal with growing worldwide demand and aged and obsolete systems? What are the challenges from competing demand for raw commodities, and what problems does that pose from a cost, inflation and capital-needs standpoint? The panel will focus on the trajectory of U.S. and global energy supply and use, its dynamic interaction with a set of driving forces -- such as technological advances, energy and climate policy and private investment -- and the effect of these factors on the future of energy infrastructure.
Moderators
Phillip Pace, Managing Director, Investment Banking Division, and Co-Chairman, Global Energy Group, Credit Suisse
Speakers
Theodore Craver Jr., President and CEO, Edison Mission Group
Brent de Jong, CEO, Ashmore Energy International
Michael Garland, Head of North America Infrastructure and Project Finance Group, Babcock & Brown
Kelcy Warren, Co-CEO and Co-Chairman of the Board of Directors, Energy Transfer Partners LP
Joseph Welch, President and CEO, ITC Holdings Corp.
9:25 am - 10:40 am
Although the business environment in much of the Middle East is dominated by large oil companies, the revenue produced by the high oil prices of the past five years has created a boom in the broader markets of these countries. As the region grows wealthier and foreign investors turn to these markets in hopes of capturing a share of this income, entrepreneurship has flourished.

Kenneth Morse of the MIT Entrepreneurship Center began the session by describing a situation within much of the Middle East where the public sector has reached the limit in its ability to provide meaningful employment and where entrepreneurship can provide hope for expanded employment through growth in the private sector. He asserted that entrepreneurship can, indeed, be taught. In fact, many of his students are from the Middle East, he said, and providing them the knowledge to succeed in those markets is an essential part of their education.

When describing the attributes he looks for in investing in local Middle Eastern entrepreneurs, Morse pointed to diligence, passion, team-building ability and global ambition. Also, in an attempt to utilize of an under-used asset, he has focused on investing in entrepreneurial women in the Middle East whose unemployment rate stands at what he considers to be a conservative estimate of 25 percent.

Shamsa Noor Ali Rashid of Forsa, a Dubai-based company that focuses on providing investment vehicles to female investors, serves as an example of this entrepreneurial spirit. By focusing their efforts on the under-served sector of female investors in Dubai who, according to Sharia law, inherit one-eighth of their fathers' estates but are excluded from the all-male social and business networks that dominate the region, Forsa has not only grown successfully but has also served as an entrepreneurial model and inspiration to other female entrepreneurs. While Morse focuses his efforts on funding startups, Shamsa Noor Ali Rashid focuses on funding business owners who have been successful at the local level and hope to expand internationally.

The panel emphasized that while risks may be higher in volatile portions of the Middle East, such as northern Iraq, where Zachary Pessin is currently doing the bulk of Scimitar Group's investing, the rewards are commensurate with those risks and what would seem to be excessively high risk to a Westerner may present a lower risk to a local entrepreneur. Pessin also pointed out that because of the limited funds currently directed toward more volatile regions, investors can be selective in who they deal with, focusing only on the best and brightest.

There was general agreement within the panel that much of the Middle East still possessed substantial barriers to entry, as well as business practices that inhibit entrepreneurialism. Moderator Robert Bush Jr. noted that the costs to starting a business in the Middle East are exponentially higher than the world average and recommended pointing this out to regional leaders in order to initiate change.

The greatest obstacle to entrepreneurial success, said Morse, was the cultural acceptance of large companies buying from small ones and then refusing to pay their bills. Shamsa Noor Ali Rashid explained this phenomenon as an attribute of the long-accepted barter system, which gives leverage to the debtor in extracting future concessions as a condition of payment. She felt that while this practice needed to be eliminated, the current GDP growth of 9 percent to 16 percent in the region justified operating in such an environment. Many of the larger companies feel that they are doing smaller firms a favor just by doing business with them, added Pessin, and that they have no real obligation to pay. Morse felt that large businesses purchasing from smaller companies, then paying their bills, was essential to the continued success of the private sector.

Robert Bush Jr. and Zachary Pessin agreed that because of the diaspora nature of the markets and the problems related to small firms receiving payment from larger firms, the natural evolution of the market should be toward a merchant banking system. This would offer investors inside knowledge of their target markets and give small firms more powerful representation to deal with larger firms on their behalf. It would also eliminate the ambiguity many western investors experience when dealing with a culture where obtaining high-level meetings is not an indicator of success and where they will never be told "no" to a proposal to their faces.

When the panel was asked which sectors they felt younger entrepreneurs are gravitating toward, Ali Rashid pointed to an explosive demand in services as westerners move into the region and search out western conveniences, while Pessin highlighted the demand for both physical and information security. He noted a trend of replacing former western military personnel who serve as security guards with Middle Eastern prior military personnel.

The final question posed to the panel was how to exit the market with your profits. While it was felt that taking companies public offered some opportunity to realize profits, it was also generally felt that Middle Eastern stock markets have not yet matured to the necessary levels of sophistication, transparency or volume to make this a dependable option. The panel concluded that scalability with competition was the most viable solution; one could either sell out to competitors or expand by buying them out.

While Middle Eastern entrepreneurship still faces substantial barriers to launching and financial success, it is the knowledge and ability to overcome those barriers, as Pessin said, that offers the potential for high returns.

Moderators
Robert Bush Jr., Partner, Dar Al Emaraat
Speakers
Kenneth Morse, Senior Lecturer and Managing Director, MIT Entrepreneurship Center
Shamsa Noor Ali Rashid, CEO, Forsa
Zachary Venegas, Partner and Co-Founder, Scimitar Global Ventures
9:25 am - 10:40 am
Much attention is given to low-frequency risk from natural disasters, financial crises, major terrorist attacks and so on that have large impacts. Moderator Joel Kurtzman of Knowledge Universe and the Milken Institute argued that global investors should be "more concerned about high-frequency, low-impact risks" that systemically affect the governments and economies of many emerging markets. These kinds of risk come from corruption, lack of transparency and poorly defined property rights. A better understanding of the systemic risks in an increasingly interdependent world is important, Kurtzman said, because "many high-risk countries have huge opportunity."

According to Jami Miscik of Lehman Brothers, "in the financial world, people are risk-takers." But they need to understand how geopolitical trends and issues can affect markets and financial flows so that "risks are taken smartly." George Hoguet of State Street Global Advisors noted that many investors do account for risk in asset prices, but that there does exist a great deal of uncertainty and ignorance.

The panelists discussed a broad range of specific risk, ranging from volatility in oil and natural gas prices to terrorism to avian flu, but they also provided examples of regional conflict or internal political instability that can cause or exacerbate risk. In a more interconnected world, they agreed, regional risks have larger consequences.

Kurtzman noted that 41 percent of global oil production comes from unstable regions of the world and that spikes in the prices of oil and natural gas are driven by specific events in the Middle East and elsewhere. Hoguet added that regional crises in the Middle East affecting the supply of oil are "biggest risks I'm concerned about." Kenneth Knight Jr. of the National Intelligence Council commented that oil prices are more likely to go "up and up, rather than down," and that, in addition the Middle East, political instability or other events in Nigeria, Bolivia or Venezuela could trigger spikes in oil prices. "Nigeria is one that's very troubling," he remarked of the important oil-producing nation, which could suffer a possible political crisis in the wake of recent electoral controversy. Miscik raised the importance of Russia′s natural gas exports to Europe, as well as the Kremlin's use of its resources as a foreign policy tool, and warned that political instability during transition could have far-reaching implications for Europe's energy supply and global energy prices.

"Terrorism is like disease," stated Richard Haass of the Council on Foreign Relations. We can fight it but never completely eradicate it. Hoguet added that up to this point, asset prices haven't been affected dramatically by terrorism, but "what would fundamentally change perceptions would be four or five 9/11s in one year." Haass disagreed, saying that he was much more concerned about the small acts of terrorism, which are cheaper, harder to detect and require fewer resources. Miscik noted that while terrorists' intentions have not been diminished, their capabilities have been.

Avian influenza was a major theme during last year's Global Conference; so why, asked Kurtzman, had the topic disappeared from the public forum? Haass responded that avian flu remains a great risk, and while "it will happen at some point, we don't know the lethality." People no longer talk about it because there is no new information about the potential lethality or timing. Unfortunately, he added, what is newsworthy is "how little is being done to prepare for it." Not nearly enough has been done to establish quarantine procedures or international codes of conduct, and he predicted that a "first wave will wash over with whatever consequences that it will have" and then governments will take stronger actions. Hoguet added that ultimately "the way governments deal with it will be a major signal to the market" about the larger financial and economic impacts from avian flu. If the response is orderly and controlled, then the markets will be much less concerned than if there is what Miscik called "political bad behavior" by politicians whose natural political instinct will be to cover up initial outbreaks.

A number of high-profile risks were of less concern to the panel. Echoing the other panelists, Hoguet said he not worried about the imbalance of trade between the United States and China, predicting that the imbalance "will work off over time." The panelists were also generally unconcerned about regional conflict in Asia because, as Haass said, "China needs global and regional stability." Underlining how far geopolitical risk has evolved over the past 20 years, the panelists were unanimous in expressing that one risk "not keeping them up at night" was conflict between great powers.

Moderators
Joel Kurtzman, Senior Fellow, Milken Institute; Executive Director, SAVE; Senior Advisor, Knowledge Universe
Speakers
Richard Haass, President, Council on Foreign Relations
George Hoguet, Global Investment Strategist, Senior Portfolio Manager, State Street Global Advisors
Kenneth Knight Jr., National Intelligence Officer for Warning, National Intelligence Council
Jami Miscik, Global Head of Sovereign Risk, Lehman Brothers
9:25 am - 10:40 am
Nearly 40 percent of the world's population -- 2.5 billion people -- lives on less than $2 a day, despite years of effort and multitudes of funds expended by governments, foundations and individuals trying to solve the problem. But is donor-supported aid the answer?

In an opening discussion of the definition of "social entrepreneurs," Jacqueline Novogratz of the Acumen Fund added that charity doesn't really solve problems in developing nations; helping entrepreneurs is a real driver for change in those emerging economies.

Professor Gerard Caprio Jr. of Williams College, explained that people forget that when countries have good incentive systems for their citizens to invest in their own futures, they don't need foreign aid —- on the other hand, nations without good incentive systems won't be able to put the foreign aid they receive to good use.

Poverty, added Zachary Pessin of Distributed Capital Group, is "a huge sign of inefficiency -- we are not leveraging human capital." Empowering individuals to create small and medium businesses is a significant driver of change.

Novogratz reminded the panel not to forget that the poor often also have unmet basic needs, such as access to water, and that corrupt governments and syndicates that control business operations prevent outsiders from competing.

Caprio pointed out that even in countries with good microfinance institutions, the reach is very small, at less than 5 percent of the target population. This suggests that financial systems in developing countries are not inclusive of the poor or that banking costs price the poor out. Pessin added that financial markets in developing nations tend to make their loans on 100 percent collateral, problematic for the creation of companies. Unless loans are risk-based, he said, the capital will not get to the entrepreneurs. The problem seems even deeper, according to Novogratz, because many of the world′s poor put their savings in the very banks that will not lend them money. Caprio noted that many people break out of poverty, only to fall back into it due to economic fluctuations.

While aid to developing countries is important, said Pessin, there must also be accountability. "We cannot simply write these countries a blank check," he said. On the topic of economic sustainability, Osberg offered the following example: In 1997 the World Wide Fund for Nature (formerly the World Wildlife Fund) and Unilever created the Marine Stewardship Council to certify fisheries for sustainable fishing. Its main objective is to safeguard the ocean's fish stock from depletion, which would make the business unsustainable. This is an example of a partnership in the right direction, she said, "but for this to be successful It will take governments, businesses and NGO′s to make it happen." This is the way jobs are created, she said.

Moderators
Betsy Zeidman, Director, Center for Emerging Domestic Markets, Research Fellow, Milken Institute
Speakers
Gerard Caprio Jr., Professor of Economics, Chair, Center for Development Economics, Williams College
Jacqueline Novogratz, CEO, Acumen Fund
Sally Osberg, President and CEO, Skoll Foundation
Zachary Pessin, President and CEO, Distributed Capital Group
9:25 am - 10:40 am
On July 24, 2001, real estate investor Larry Silverstein was awarded the bid to lease the World Trade Center in New York City. Seven weeks later, the buildings were destroyed when two jetliners that had been hijacked by terrorists crashed into them.

Realizing that a symbol of hope was needed in those desperate times after 9/11, Silverstein and his team started planning to rebuild. Aside from the tragic loss of lives, 9/11 was also a devastating blow to the city's and the region's economies, he said.

Silverstein pointed to an estimated annual economic impact of $15 billion to the region with the reconstruction, including 100,000 jobs that will be connected to the project. Of course, this comes at a price: the investment in the towers, a memorial and expansion of a mass transit hub add up to $20 billion -- money pooled from public and private sources.

The new buildings are "designed to embody everything we learned in 9/11," said Silverstein. Apart from finding David Childs, the man behind the Freedom Tower, Silverstein and his wife traveled the world to find the right architects for the project. Three of the world's best were chosen, all of them Pritzker Architecture Prize winners: Richard Rogers and Sir Norman Foster of the UK, and Fumihiko Maki of Japan.

Of the Freedom Tower, he said that "this building is designed to withstand anything." An explosion specialist from Israel was consulted in the design. But safety is not the only field in which the Freedom Tower is state of the art. It is also a worldwide leader in environmental-friendly construction, technology and sustainable design. Rainwater will be stored and used to cool the buildings as well as irrigate the memorial park, for instance. "Notwithstanding my name," he said to audience laughter, "we won the Gold Standard (for energy-efficiency rating), which I think is pretty terrific."

The three towers planned thus far are drifting down in size. The tallest structure, the Freedom Tower, will stand 13,038 feet tall, the same height as the original towers. This will extend to 1,776 feet when one includes the antenna. "It will be the world's tallest building for about ten minutes," joked Silverstein, adding that a developer in Dubai is planning a larger structure in the near future.

Sir Norman Foster is the architect behind Tower No. 2. It has a distinct cant that defers to the memorial site below. The trading floors, Silverstein noted, are among "the most efficient trading floors you can ever find."

Richard Rogers designed Tower No. 3. Its theme is "lots of space, lots of grandeur," structural support on the outside of the building that provides for modern design and no column obstruction inside for a maximum usage of space. Tower No. 4, the Maki building, will be "simplistic in its design ... but exquisite in its simplicity," said Silverstein. The concept involves "enormous transparence, enormous amounts of light."

Different political player exerted massive amounts of pressure and had different agendas in the planning process. Political dynamics changed during the presidential campaigns in 2004 and the mayoral campaigns shortly thereafter. Silverstein emphasized that "negotiating with one (political player) ... was totally inefficient." Instead, he argued, different parties had to be brought together. All viewpoints were considered, and the final product is a compromise that reflects different preferences. "It took us a long time to get there but we finally got it."

The project is expected to be finished by 2011. It aims to augment the recent developments in downtown Manhattan that have resulted in more residential and retail neighborhoods. The rebuilding has by no means been an easy process so far -- it took five and a half years to get everybody on board. And it will likely continue to be a rocky road, said Silverstein, but "if you keep your eye on the goal and if you are determined, you can reach your mission."

Speakers
Larry Silverstein, President and CEO, Silverstein Properties
9:25 am - 10:40 am
Moderator Richard Merkin of Heritage Provider Network opened this panel with two challenges to his panelists: first, to open the "black box" that health care represents to most Americans and make it transparent. And second, to address ways to lower health-care costs.

Glenn Melnick, a professor at the University of Southern California, noted that in the past year, the nation has seen a 9 percent increase in premiums. Standard health insurance is based on the idea of fee-for-service reimbursement, which means it rewards physicians who perform more tests, prescribe more treatments. In fact, he asserted, many practices are revenue-motivated, and this is a factor in the rise in health-care costs. For example, hospital committees may insist on keeping patients in ICUs -- patients who have no hope for recovery. Such decisions can cost up to $5 million or $6 million per case.

"Lowering costs and improving quality of care may be a nationwide solution" to the problem from the economic perspective, said Melnick.

Marc Hoffing with Desert Medical Group and Oasis IPA explained that organization has come up with various ways to reduce health-care costs. One way is determining high-risk patients and assigning so-called case managers to them and their families. "We have built a system to respond to patients' needs," he said.

"In health care geography is destiny," added Hoffing. For instance, California patients usually spend only a few days in ICUs, while those in Florida may spend several weeks, even for similar conditions. An average hospital stay bill charges may run up to $10,000 or $11,000 per day. One way to reduce these expenses, he explained, is to perform necessary procedures when a patient is admitted to the hospital or, if admitted on Friday, to provide necessary care over the weekend.

Gordon Yenokida with Regal Medical Group agreed that there is a problem with fee-for-service principle. "When doctors are compensated based on the number of the procedures, and not their necessity," he said, "there takes place an over-utilization." Physicians need to start asking themselves if the tests they order are truly necessary.

Robert O'Keefe with Coastal Communities Physician Network provided information on the various programs his organization has implemented. For example, the program Choices helps develop reasonable expectations for patients and their families, including end-of-life options. He agreed that weekend procedures may be beneficial for hospitals. In fact, he stated, "28 percent of health-care costs can be saved by performing procedures on the weekends." O'Keefe also suggested that more can be done in outpatient settings and that hospitals could be used only as ICUs. All participants agreed that health-care system has to consider a variety of issues. As Merkin noted, health care "has to be integrated and led by physicians who can lead and can maintain their organizations with fiscal integrity." Switching from a fee-for-service reimbursement principle, they said, would help change the health-care system and provide higher quality of services and lowered costs.

Moderators
Richard Merkin, CEO and Founder, Heritage Provider Network; FasterCures Board Member
Speakers
Marc Hoffing, Medical Director, Desert Medical Group and Oasis IPA
Glenn Melnick, Professor and Blue Cross of California Chair in Health Care Finance, University of Southern California; Senior Economist, RAND
Robert O'Keefe, CEO, Coastal Communities Physician Network
Gordon Yenokida, Chief Operations Officer, Regal Medical Group
9:25 am - 10:40 am
In this session, the Milken Institute will preview preliminary results from a major research project. Each year, millions of Americans die or become disabled from chronic diseases, which takes an enormous toll on families and other loved ones. But less talked about is the toll these diseases take on business, government and the economy. This study will show how much chronic diseases cost our economy and how much could be gained if we improved people's health. The total economic burden of chronic disease includes not only the direct medical costs, but the forfeited growth in GDP and income. First-of-its kind elements of this research are estimates of longer-term reductions in economic growth due to morbidity/mortality and lower intergenerational investment in human and physical capital. We project, for the U.S. and all 50 states, how altering prevention (behavioral and other risk factors), early detection (screening and diagnosis) and innovations in treatment can reduce health-care system costs over time and improve economic growth.

This session is by "invitation only" and is limited to invited guests. If you are interested in attending, please send an e-mail request to jmeehan@milkeninstitute.org.

Moderators
Ross DeVol, Executive Director, Economic Research, Milken Institute
9:25 am - 10:40 am
Health care is the single largest industry in the United States, with an estimated $1.9 trillion in expenditures. Spending for health-related issues is expected to grow in excess of 7 percent each year. In spite of suchheavy spending, a great deal of unmet need exists in the health field today. There are many more diseases than cures, with only about 10,000 of 30,000 diseases having treatments. In addition, millions of Americans remain uninsured or underinsured. On a positive note, health care's dramatic growth is fueling the increase in life sciences funding research and the number of public companies within the sector.

Although many variables are thought to affect medical solutions, this session was devoted to financial innovations driving medical solutions. Panelist James Heywood of the ALS Therapy Development Foundation explained how his brother's diagnosis with ALS shaped how he views the intersection between the financial and medical worlds. "I shifted the equation from a supply-side problem to demand-side problem," he said, from projects to process. This process involves determining what makes a drug, idea or company valuable. Consequently, his idea of accelerating medical solutions centered on an innovation designed to validate which idea is worthwhile.

Also inspired by a personal story, John Walsh of the Alpha-1 Foundation described how he and his brother were affected by the disease. Ironically, it was not the physical manifestations of the disease that were worrisome, but the fact that there was only one therapy, which was also in short supply. As a result, everyone receiving the therapy was under-treated. So he decided to invest in the infrastructure to hasten medical solutions. This investment, he added, has produced many successes: two new products licensed; three therapies in clinical trials; six therapies in clinical development pipeline; three innovative therapeutic pathways identified; and $28 million invested in research.

Much of the debate included discussion on pharmaceutical advancements, particularly drug discovery and development in the United States, where for the past 20 years there has been a commitment to combinatorial chemistry and high "throughput screening" (HTS). Panelist Fredric Pashkow of Cardax Pharmaceuticals supported the idea of focused drug design to move medical solutions forward through financial ideas. Unlike traditional HTS, focused drug design involves using fewer compounds and reducing preclinical development costs, which eliminated three years or more from the normal drug discovery trajectory.

In a discussion of ethics, panelist Pashkow underscored the importance of transparency and being connected to the best investigators in the field. "You must have trust, an inherently decent compound and a program that translates," he said. Also building on the notion of trust, panelist Neil Sandler of Symphony Capital LLC maintained that transactional trust is imperative to enhancing new discoveries. Mary Beth Borgwing of Willis Group Holdings spoke of the need to insure the risk of humans in clinical trials.

Pashkow suggested collaborating with foundations on drug discovery initiatives. An audience member similarly maintained that nonprofits are in the best position to deliver treatments in an unbiased manner. Regardless of which area each panelist worked, they all acknowledged the need for a system that is ethical and effective and produces returns for investors.

Moderators
Glenn Yago, Director, Capital Studies, Milken Institute
Speakers
Mary Beth Borgwing, Senior Vice President, NY Life Sciences Practice Leader, Willis Group Holdings
James Heywood, CEO and d'Arbeloff Founding Director, ALS Therapy Development Foundation
Fredric Pashkow, Chief Medical Officer, Executive Vice President, Cardax Pharmaceuticals
Neil Sandler, Managing Director, Symphony Capital LLC
John Walsh, Co-Founder, CEO and President, Alpha-1 Foundation
9:25 am - 10:40 am
Speakers
John Troughton, Senior Director, Cushman & Wakefield Inc.
10:30 am - 11:15 am
10:50 am - 12:05 pm
Legendary oilman Boone Pickens, who has often correctly predicted the movement of oil markets, believes that global oil production is near its peak, which means higher prices are inevitable. Steve Forbes, publisher of Forbes magazine and a former candidate for the Republic Party nomination for president, thinks politics, not technology, is standing in the way of more oil and once we fix that with the proper incentives, production will increase and prices will stabilize. Who's right? You can decide for yourself in what promises to be an insightful look at today's oil markets.
Moderators
Brian Sullivan, Anchor, Bloomberg Television
Speakers
Steve Forbes, President and CEO, Forbes Inc.; Editor-in-Chief, Forbes
Boone Pickens, Entrepreneur and Philanthropist; Founder, BP Capital
10:50 am - 12:05 pm
In the ongoing search for investment returns, emerging markets offer real opportunity. Yet they also pose challenges such as such as limited access to markets, immature legal and regulatory systems, political and currency risks, and enormous volatility. In March, these markets experienced declines that were second only to the August 1998 Long Term Capital Management crisis and the Russian debt default. What does the future hold? Could "contagion" return to emerging markets? Can risks be mitigated with innovative financial instruments? Panelists will discuss their visions for these markets and how financial technology could help hedge risks and produce both financial returns to capital and social benefits to the community.
Moderators
Glenn Yago, Director, Capital Studies, Milken Institute
Speakers
Christopher Ailman, Chief Investment Officer, California State Teachers' Retirement System (CalSTRS)
Mark Farrington, Managing Director, Head of Currency Management, Principal Global Investors
Caleb Fundanga, Governor, Bank of Zambia
Ronald Peyton, Chairman and CEO, Callan Associates Inc.
Steven Schoenfeld, Chief Investment Officer, Global Quantitative Management, Northern Trust Global Investments
10:50 am - 12:05 pm
The world is enjoying an unprecedented era of medical research, accompanied by great hopes and concerns in the globalization of medical discoveries. Globalization opens the problems of the world to great scientists and allows new ways of looking at old problems that will lead to breakthroughs, said Seth Berkley of the International AIDS Vaccine Initiative. The worry, he added, is in making sure that the full range of diseases get researched, not just the diseases the West already focuses on.

Carol Cruickshank of A.T. Kearney pointed out that globalization presents "opportunities to accelerate, to move drugs to market more quickly and bring more to patients faster." The challenge, she said, will be to ensure that the benefits of globalization are spread ethically, and that quality is ensured across the board. G. Stephen Burrill of Burrill & Co. added that one of the challenges in globalization is harmonization from a regulatory and patent standpoint.

The health-care industry is now able to use a global perspective to view differences in persons with disease. According to Andrew von Eschenbach of the U.S. Food and Drug Administration, we are more aware than ever of the molecular processes and needs of individuals. "The personalization of treatments will move us into a world of 'predictiveness' and ultimately in a world of 'preventiveness,' where we will treat the well, not only the sick." He sees challenge is in the need for a higher degree of global interoperability and knowledge sharing among nations.

In a discussion of overseas clinical trials, Cruickshank noted that 48 percent of the trials conducted by the top 12 pharmaceuticals have been located outside the United States. Offshore clinical trial activity has increased by 20 percent in the last year alone. For the most part, these trials are moving to emerging markets; the top countries making ground are China, India and Russia, all attractive to pharma because of the large potential patient pools, developed infrastructures, low costs, available expertise and good regulatory environments.

Eschenbach noted that there are no inherent barriers to the FDA using data generated from offshore trials so long as the entire research continuum -- such as using the appropriate patient pool and collecting reliable raw data -- is acceptable. The FDA judges all trials on a case-by-case and study-by-study basis. And while the agency lacks the resources to check every country's infrastructure, it has sufficient strategic alliances to ensure that proper procedures are being followed. He also pointed out that when using overseas populations for studies, the obligation exists to care for them.

The panel also stressed the importance of globalizing innovation in medical discoveries. Burrill stated that the increased use of generic medications to temper rising health-care costs is a large disincentive for innovation. On average, a new drug costs $1.2 billion to $1.8 billion to bring to market, he said, and only one-third of drugs that make it to the market recover their initial investments. An additional disincentive, said Berkley, is the regulatory uncertainty in the industry. He supports rationalizing a differential pricing strategy for drug sales and concentrating less on blockbuster drugs. Essentially, by charging the most to those who can pay the most and charging the least to the disadvantaged, drug companies could increase their overall profitability while improving access.

The panelist agreed that there will never be an "international FDA" that globalizes medical discoveries, but that we can globalize the processes each country follows. In some views, the FDA process may be superior to other countries' regulatory bodies, but it depends on the type of disease and drug.

Moderators
Greg Simon, President, FasterCures / The Center for Accelerating Medical Solutions
Speakers
Seth Berkley, President and CEO, International AIDS Vaccine Initiative
G. Stephen Burrill, CEO, Burrill & Co.
Carol Cruickshank, Vice President, A.T. Kearney
Andrew von Eschenbach, Commissioner, U.S. Food and Drug Administration
10:50 am - 12:05 pm
With the Internet still in its infancy, today's successful Internet companies have come a long way from those of the "bubble" era. They consist of strong survivors whose core was built during those first years, leading offline corporations adapting online and exciting, new and profitable players that have emerged very rapidly. Underlying all of them are some core principals: recognition of the value of a memorable and strong Internet brand and address; recognition that the most important aspect of any successful Internet business is to build a strong audience, defined by loyalty, participation and conversion rate; the prominent role that users play in developing Internet businesses (also known as user-generated content, social networks, or, just Web 2.0); leveraging and embracing the open-walled /open-sourced environment to rapidly and cost-efficiently build Internet businesses; and a strong understanding of basic Internet marketing, including search engine optimization, keyword buying and arbitrage, and affiliate and viral marketing. This discussion will center on the importance of applying these principles to create the successful Internet companies of tomorrow.
Moderators
Andrew Miller, Co-Founder and President, Internet Real Estate Group LLC
Speakers
Matt Coffin, President and Founder, LowerMyBills.com; President, Experian Interactive Innovation Center
Suzanne DiBianca, Chief Service Officer and Executive Director, Salesforce Foundation
Scott Stanford, Global Head of Internet Investment Banking, Goldman Sachs & Co.
Mike "Zappy" Zapolin, Co-Founder, Music.com
10:50 am - 12:05 pm
Despite decades of debate about making government more efficient and effective, big-time problems persist. Government procurement has failed to produce hoped-for savings, government response to disasters, such as Katrina, have been shown to be inadequate. In some cases military procurement has gone backwards from the 1990s when the call was for inexpensive "open architecture" rather than expensive proprietary architecture for systems design. What should policy makers and procurement officers do to make government more efficient and effective? What can be done to turn previously empty promises about government reform into real action that will save taxpayers' money and force government agencies to respond more quickly - and more effectively - to changing conditions?
Moderators
Joel Kurtzman, Senior Fellow, Milken Institute; Executive Director, SAVE; Senior Advisor, Knowledge Universe
Speakers
Harold Ford Jr., Former Congressman; Chairman, Democratic Leadership Council
William Frist, Former Majority Leader, U.S. Senate
Frank Ostroff, Managing Partner, Ostroff & Associates LLC
10:50 am - 12:05 pm
Now that Japan has begun to rebound from recession, what will drive its competitiveness in the near future? Leading Japanese companies, the same ones that led the past two decades of growth, are staking their futures on technology innovation around environmentally friendly products and services.

Japanese companies "have to incorporate global social values to be competitive in the future," said Hideki Yamawaki, Associate Dean of Claremont Graduate School and a professor of management. All of the companies represented on the panel -- Sharp, Sumitomo Electric and Honda -- seem to recognize that fact. "Increasing energy consumption produces massive environmental conditions," said Ryosuke Hata of Sumitomo Electric.

Not surprisingly, these same companies have also been innovators around technology-friendly products for a long time, in some cases decades. In fact, this "revolution" is just the next stage of evolution in Japan's economic growth, said Professor Yamawaki. In the 1950s and 1960s, the Japanese automotive industry responded to demand and capital constraints by inventing lean production. Then, in the export-led 1960s and 1970s, the industry responded to domestic and U.S. regulatory constraints by developing reliable compact cars. Now, in general, Japanese companies are responding to demographic and environmental constraints by spearheading new ways to both conserve energy and create sustainable energy.

The potential commercial, residential and industrial applications of environmentally friendly technology to products and services are numerous, said Shinichiro Yahiro of Sharp Electronics Corp. They also include so-called "off-the-grid" applications, such as remote housing and irrigation systems. Each panelist presented multiple examples of applications by his company across these categories.

Honda was the first company to introduce a hybrid automobile, in 2000, 20 years ahead of what had been forecast. Now the company is striving to create a zero-emissions vehicle based on alternative fuel sources, such as hydrogen power. As for skeptics who question the safety of smaller cars, Ben Knight of Honda Americas noted that small cars can be both safe and fuel-efficient. In fact, the Honda Civic hybrid is "in the lower half of cars in terms of fatalities in the U.S.," he noted. Moreover, Honda is on the verge of introducing the HondaJet, a private-use aircraft that will produce 30 percent to 35 percent less emission than comparable aircraft.

At Sumitomo, the vision of the GENESIS Project is to power the world via a network of solar panels located in deserts and connected by super-conducting wires. It may sound like fantasy, but the "door is open for mass-producing super-conductive cable" that has no electrical resistance, Hata said. To illustrate his point, he described Sumitomo's ongoing solar project with Albany, N.Y., to provide electricity to tens of thousands of households. To Hata, the idea is remarkable but also very old: "Human being were born and raised under the sun," he said, "and have relied on solar energy forever."

Yahiro explained that Sharp was one of the first companies to enter the solar energy market. And this emerging opportunity to develop environmentally friendly products "is the next pillar for our growth." Sharp has already installed 350,000 solar power units in homes across Japan, and in the United States, the company implemented a solar power system for Fedex in 2004 that meets 60 percent of peak demand for Fedex's Oakland distribution hub.

However, there are many obstacles to success, not the least of which is spurring demand for environmentally friendly products and services. As Knight said, it is "a chicken-and-the egg conundrum." Japanese companies must create products that consumers want in order to fund investments in infrastructure, but they must develop the infrastructure in order to create attractive new products.

Moderators
Woodrow Clark II, Senior Fellow, Milken Institute; Founder, Clark Strategic Partners
Speakers
Ryosuke Hata, Managing Executive Officer, Sumitomo Electric
Ben Knight, Vice President, Automotive Engineering, Research and Development, Honda Americas
Shinichiro Yahiro, Associate Vice President, Solar Energy Solutions Group, Sharp Electronics Corporation
Hideki Yamawaki, Professor of Management, Associate Dean, Peter F. Drucker and Masatoshi Ito Graduate School of Management, Claremont Graduate University
10:50 am - 12:05 pm
"Most of what we read in the press regarding the present state and future of New Orleans is negative," said Tulane President Scott Cowen as he opened the panel. "We are living a case study right now of rebuilding an urban city after the worst natural disaster this country has ever seen."

However, he added, there are also a lot of positive changes under way, and many opportunities. In fact, said Cowen, "Everything discussed here (at Global Conference) can be applied to the rebuilding of New Orleans."

Given those words, the panel of experts addressed what was going right in New Orleans and what still needs attention. Lt. Governor Mitch Landrieu tackled two primary myths about the area's damage. First, he said, Hurricane Katrina did not cause most of the city's devastation. On the contrary, most of the damage resulted when the levees broke. Had those levees been built strong enough to handle a hurricane above a category 3, the city would have been spared a great amount of destruction.

Second, Landrieu said, the issues New Orleans is currently dealing with are not unique to the city. What Americans saw on the ground -- poverty, racism, urban sprawl -- is happening across the country. The hurricane just brought national scrutiny to problems the public typically ignores, but which are in dire need of addressing.

John Kallenborn of JPMorgan Chase Bank explained that $40 billion has been put back into the New Orleans economy from insurance settlements; per capita income is up from 2006; unemployment is the lowest it has been, at 3.8 percent; and 80 percent of businesses are doing the same as before Katrina, 6.9 percent are doing better, and 6.4 percent are doing worse. "Surprisingly," said Kallenborn, "business is pretty good."

But more areas than not continue to need help -- including the levees, the Delta wetlands and a comprehensive approach to housing, education and jobs. However, the most vital problem -- and the most crucial component to solving the problems -- remains federal involvement, and state and local government alignment.

Current levee standards can only handle a category 3 hurricane, and Louisiana must invest in development and infrastructure that protect against the worst-case scenario. The panelists noted that the engineering exists to solve the levee challenges, but that no city can realistically be expected to finance construction of such a massive state-of-the-art levee system. As for wetlands protection, Landrieu said that an area the size of a football field is lost to the gulf every 30 minutes. He estimated that it will cost approximately $35 billion to secure and protect the deteriorating wetlands, which protect the river, the city and the region.

The panelists agreed that determining priorities -- jobs, housing, schools or infrastructure -- was complexl they are, after all, inextricably linked. While one might expect that a recovery master plan exists, the reality is somewhat more dismal. Only one of three phases has been completed, and it covers just the first five years post-Katrina. Moreover, it was prepared by someone who reports to the mayor's office. No long-term plan exists that has the buy-in at all levels.

Panelists insisted that the federal government must intervene to address all these issues and provide a master plan comparable in size and magnitude to the New Deal or Marshall Plan. According to Andrew Young, former U.S. ambassador to the United Nations and current chairman of GoodWorks International, it is not just the future of New Orleans at stake, but the future of the Mississippi Valley, which ultimately serves the entire nation.

All panelists expressed optimism about the future of New Orleans. Sean Cummings of Ekistics Inc., charged with developing a strip of land on the city's waterfront, detailed a number of opportunities for private-public partnerships to enhance and contribute to the restoration of the area′s cultural vibrancy, including culinary colleges, opera houses, museums and other developments.

The panelists also stated that race did not play a role in the post-Katrina disaster; the destruction hit white neighborhoods just as heavily as it did African American neighborhoods. Making the tragedy a "race issue," they asserted, has detracted from what is most important. But it does offer the opportunity to discuss the implications of making issues race-based, rather than political or economic.

The biggest opportunity of all will be for the 2008 presidential candidates, they noted. "Not one candidate has mentioned a plan for the reconstruction of New Orleans," said Ambassador Young, who predicted that the candidate who offers a long-term vision for the Mississippi Valley will be elected president. And he recommended that other states take time now to address their own issues of poverty, racism, health care and disaster-preparedness, all of which were pre-Katrina issues in New Orleans. Do it now, he said, to be better prepared during whatever catastrophes may come.

Moderators
Scott Cowen, President, Tulane University
Speakers
Sean Cummings, President, Ekistics Inc.
John Kallenborn, President, New Orleans Region, JPMorgan Chase Bank, North America
Mitch Landrieu, Lieutenant Governor, Louisiana
Andrew Young, Co-Founding Principal and Chairman, GoodWorks International; former U.S. Ambassador to the United Nations
10:50 am - 12:05 pm
More than a trillion dollars' worth of unfunded retiree benefits exist in the United States, and an estimated $40 billion to $70 billion in those benefits are from the state of California.

"Let the public educate politicians that they want solutions -- and now," said Jarvis Hollingsworth. "Education, environment, health care -- we need think about it now."

Orin Kramer warned that we should update our mortality tables "since we are basing facts on fiction rather than reality." That is the first step, he said, adding that news media aren′t picking up on the issue and thus there is little public awareness or urgency around the growing problem.

Hollingsworth also noted that governments must learn how to measure assets and liabilities correctly. The current system of "smoothing out" gains and losses is confusing and misleading. Texas, he explained, uses a five-year smoothing method and hedges against extremes by having a diverse portfolio. He expects a yearly return on investment to be at least 8 percent, adding that the best way to obtain an accurate view of the amount needed to cover the deficit is to make smart investment decisions and not rely solely on contributions. Investment returns must surpass costs and outpaying benefits by at least 8 percent, he added.

All panelists agreed that the GASBY method of accounting was more flexible and accurate than the FASB method. "Discounting at 8 to 9 percent is relative to the current public funds but is also very challenging due to the lack of expertise and antiquated methodology and narrowly defining asset allocations," said Bradley Belt.

"In the Nineties, the University of California had big pluses," he said, "but 65 percent of equity was only in 14 stocks -- talk about risk taking." Belt also stressed the importance of asset diversification. "The real question we must ask ourselves is, 'how are we going to finance these?' We need hybrid systems that cut risk but are also flexible."

Gerald Parsky laid out his plans for an effective allocation: 65 percent equity, 25 percent fixed income and 10 percent real estate. He lost almost $30 billion in 2001 through 2002, he noted. He advises investment in international markets and decreased reliance on domestic markets. Private equity is estimated to be between $4 billion to $10 billion, and with optimum allocation, returns to be between $1 billion to $2 billion per year.

This is considered to be the big drive for paying the cost of investment returns, figuring that no future contributions will be made. He asked, "Why shouldn′t the federal government want low borrowing costs, pensions, Medicare, toll roads etc.?"

On an optimistic note, Jarvis said that "we can begin to reserve for future obligations if we begin now, and plan intelligently. The public needs to become more aware of the problem, and understand that it will not just disappear. We need to face it and solve it together."

Moderators
Bradley Belt, Chairman, Palisades Capital Advisors; former Executive Director, Pension Benefit Guaranty Corporation
Speakers
Jarvis Hollingsworth, Partner, Bracewell & Giuliani; Chairman, Teacher Retirement System of Texas
Orin Kramer, General Partner, Boston Provident LP; Chairman, New Jersey State Investment Council
B. Scott Minerd, CEO and Chief Investment Officer, Guggenheim Partners Asset Management
Gerald Parsky, Partner, Aurora Capital Group
10:50 am - 12:05 pm
This session is by "invitation only" and is limited to invited guests. If you are interested in attending, please send an e-mail request to jmeehan@milkeninstitute.org.
12:15 pm - 2:00 pm
Despite healthy growth in 2006, the global economy still faces many challenges, including the complexity of global trade and financial integration, poverty, nuclear proliferation, energy and climate change. How will the global economy cope with these risks and opportunities? How should investors and corporations deal with excess liquidity and low inflation environment? Where are the highest risks and potential rewards to be found? Where will the highest growth be? Can China's growth continue with the appreciation of the yuan? What is the impact of the emergence of India on global prosperity?
Moderators
Paul Gigot, Editorial Page Editor, The Wall Street Journal
Introduction By
Michael Klowden, President and CEO, Milken Institute
Speakers
Gary Becker, Nobel Laureate, Economic Sciences, 1992; University Professor of Economics and Sociology, University of Chicago; FasterCures Board Member
Guy Laffineur, Global Head of Fixed Income, Head of London Capital Markets, Calyon
Rupert Murdoch, Chairman and CEO, News Corporation
David Rubenstein, Managing Director, The Carlyle Group
2:10 pm - 3:25 pm
China's remarkable economic growth over the past decade has ushered in a paradigm shift in its investment climate, and trends, challenges and opportunities were the subject of this panel. Despite three popular myths about China's economy, they concluded, China remains an attractive investment destination. The key is to maintain a long-term outlook and to exercise patience.

Three misconceptions about China's economy plague many observers, distorting the picture of the country's investment climate. The first is that China's economy is about to crash and burn. Jonathan Anderson of UBS noted that although the economy is overheating in some sectors, people are still making a lot of money, and that there is not a massive wave of overinvestment.

Myth No. 2 is that opportunities to invest in China's export-driven economy, supported by cheap labor, are drying up because of rising labor costs. Anderson dispelled this misconception by noting that most Chinese companies serve a growing and long-term domestic market. Myth No. 3 concerns a supposed backlash building against foreign investment. David Rubenstein of The Carlyle Group asserted that this is not the case. The only significant barrier to foreign investment, he said, consists of restrictions on investing large stakes in state-owned enterprises, and taking them private.

Rubenstein captured the need for a long-term outlook by noting, "Bismarck famously said that there are two things you don't want to see being made. One was legislation, the other was sausage. Maybe he would have added 'pre-IPO' (basically, quick-profit) deals."

The Chinese don't wake up every morning thinking how they can make U.S. investment firms rich, added Rubenstein. Instead, China, which suffers no shortage of funds, hopes to gain foreign technology and other expertise through foreign investments. Investors who seek to make quick profits will probably be less successful than those with a long-term outlook. He noted that private equity investors, tending to stay invested even during downturns, can achieve better rates of return once the economy rebounds.

Two long-term challenges China faces present investment opportunities. Anderson noted that the demographic changes brought about by its one-child policy, and the resulting possibility of not being able to finance pensions for China's aging population, pose significant challenges to economic growth.

From an investment standpoint, China's consumption pattern is an "investment holy grail," said Timothy Dattels of TPG Capital. The rising consumption of automobiles is an example of the huge growth potential in certain sectors of the economy.

Dattels and Rubenstein suggested that "green investment," to finance solutions to China's serious environmental problems, will be another huge growth opportunity. With regard to mitigating China's environmental problems, Shelly Singhal of SBI Group added that China is capable of quickly mandating change in environmental standards without much debate. Rubenstein summarized by noting that the best investment targets are in companies that provide goods and services for the domestic Chinese market. Financial services, health care and consumer durables bode well for long-term growth.

In addition to serving as a destination for foreign investment, China is also investing abroad as its economy matures. The Lenovo deal, where the Chinese firm Lenovo bought out IBM's personal computing division, serves as a harbinger of a future trend. Excess liquidity in China also serves as motivation for outward investment from China. With almost $4.5 trillion of liquidity sitting in Chinese banks -- earning low rates of return -- China is destined to become a huge exporter of capital in the next 10-20 years. The United States should be prepared for such flows of capital coming in from China, and not react, as during the CNOOC-UNOCAL deal, as if the "Red Army were about to invade Los Angeles," quipped Rubenstein.

The panelists concluded the discussion by noting that despite China's attractiveness as an investment destination in the years to come, macroeconomic and political pressures should not be forgotten. It will be important to watch how China manages its transition from being a low-cost producer of goods to a high-value manufacturing and services economy. Problems such as environmental issues and rising inequality will exert both political and economic stress on the country′s future. As its economy grows, its leaders' penchant for exerting a more dominant political role on the world stage may also have long-term effects on its investment climate.

Moderators
Henny Sender, Senior Special Writer, The Wall Street Journal
Speakers
Jonathan Anderson, Managing Director, Asia-Pacific Economics, UBS
Timothy Dattels, Partner, TPG Capital
David Rubenstein, Managing Director, The Carlyle Group
Shelly Singhal, Founder and CEO, SBI Group
2:10 pm - 3:25 pm
Laughter and admiration pervaded the ballroom where editor and publisher Mortimer Zuckerman interviewed the iconic and legendary actor/author Kirk Douglas. In his 90 years, said Zuckerman by way of introduction, Douglas has appeared in 90 films and published nine books.

In 1996 the actor suffered a stroke, impeding his speech. Since then, he has been working diligently with a speech therapist -- his progress measured by the laughs he received and the thought-provoking comments he made during the interview.

Douglas began the interview with self-depracating humor. "I've discovered that when I speak slowly, people listen," he said. "They think I'm going to say something important." For the following 45 minutes, the actor continued to showcase his humor and thoughtfulness as he shared memories and views on topics ranging from philanthropy to his famous family and favorite film roles.

A pervasive theme throughout the conversation was his stroke and subsequent recovery. He developed a sense of humor to sustain himself, evidenced by the fact that he is "waiting for silent pictures to come back." In response to the question "What was your inspiration to come back like you did, and fight that battle?" Douglas turned serous and said, "A stroke is the most depressing thing. I have had suicidal impulses -- you get so depressed." He credited his wife as "a big help" and said that for him, "the cure for depression is to think of others, (which can) alleviate the pain you are feeling." He added that "you can always find something to be grateful for ... but I must admit that having a stroke is something very difficult to deal with."

Douglas has strong feelings about helping others, particularly the youth of the world. "Violence is terrible for young people to be exposed to," he said, "and we have to counteract it. ... The world is in a mess, and the young people are going to inherit the mess, so we should do everything we can to help them." One way to do this, he said, is to "set an example -- do the best you can do, but set an example and kids will follow that example. They will learn that there are other things in life than money. They will learn how important it is to help other people. It all goes back to what I say over and over again -- we have to be better people and look after others."

This desire to make the world a better place is closely tied to his relationships with his own children. Zuckerman asked Douglas what it takes to be a better father, even a great father, and Douglas replied, "One thing I said to Michael was, 'Was I a good father?' and there was a long pause, a long pause. Michael says, 'You were a great father.' I thought about the long pause and realized that I became a good father when I needed my son more than he needed me. And I realized that I could have been a much better father if I wasn't in a business where you're so wrapped up in yourself, as an actor. ... If I could do it over now, I would be much better."

Zuckerman asked him about Hollywood families managing fame and wealth and raising children at the same time. "When I was writing my book," said Douglas, "I hesitated to write about my younger son Eric, who died from an overdose of drugs." Ultimately, he explained, he chose to include it because he felt it might help others. "It's all about what we can do to make the world a better world for children -- that's one of the big problems." When a parent loses a child, he explained, the loss is accompanied by guilt. They wonder, "What did I do that I shouldn't do?" Ultimately, he determined that "you just have to live with it ... but all these problems are interrelated. That's why I dedicated my book to my grandchildren ... I hope it will help them, that is all we can do."

In discussing his son Michael, of whom Douglas is clearly exceedingly proud, the film Wall Street came up; in it Michael Douglas plays a character who exalted greed, and Douglas was asked, "Do you think the world today is characterized by more or less greed?"

"Oh, more, much more," he said, provoking laughter. "I think (Michael was) responsible for increasing the greed in the United States and maybe in the world because he did that movie and he made a speech saying greed is good for you. And he was so convincing that he won an Oscar. And I said that has convinced other people. "And that is another thing we need to correct," he said, as the audience broke into laughter, "so that my son Michael will not feel so bad."

Zuckerman noted that Douglas had written that to be a great actor, one must delve into the character's persona. And he wondered why Douglas said that of all his roles, his favorite had been Vincent van Gogh (in the 1956 film Lust for Life) because of the pain the artist suffered. "All the roles have affected me differently," said Douglas, "because usually when an actor is acting, he is in control. But when I did van Gogh ... I felt for the first time that he took me over, because I was so intrigued by his life. I have never had a movie affect me like that one did."

Douglas was working during the infamous Hollywood blacklist, and of that time he said, "When you mention the McCarthy era, that was a terrible era ... my industry was so hypocritical." He helped break the blacklist by successfully opposing director Stanley Kubrick's plan to take credit for writing

Spartacus, which had been adapted from a Dalton Trumbo novel. Trumbo, on the blacklist, had spent nearly a year in prison for refusing to provide information to the 1947 House Un-American Activities Committee about alleged communist influence in Hollywood.

Religion is another topic about which Douglas is passionate, "In my book," he said, "I have one chapter titled 'Don't Be Too Religious.' I think all religions can be dangerous, and there are good people and bad people in all religions." The actor added that he had experienced anti-Semitism throughout his life, but "I survived it. You know, when I was in college, by a fluke I became the president of the student body. ... Now before that, no fraternity would have me as a Jew." After his win, the fraternities suddenly began to show an interest in him, "but it was hypocritical," he noted.

The audience admiration spilled over into thundering applause and a standing ovation. This beloved figure of American cinema and culture can clearly still captivate a crowd.

Interviewers
Mortimer Zuckerman, Chairman and Editor-in-Chief, U.S. News & World Report; Publisher, New York Daily News
Speakers
Kirk Douglas, Actor
2:10 pm - 3:25 pm
At the end of February 2007, newspapers reported the largest leveraged buyout in history, when a group of private equity firms led by Texas Pacific Group (TPG) purchased the Texas utility TXU for $45 billion. The deal made waves financially, but also environmentally. The buyers worked closely with the Natural Resources Defense Council and other environmentalists to broker a deal designed to appeal to those on the green side. Among other actions, TXU agreed to scrap eight out of 11 planned coal plants.

However, such a good start is not good enough, according to Laura Miller, the Mayor of Dallas. Claiming that the three remaining plants slated for construction will be extremely dirty and threaten the air quality of Texas cities, Miller continues to oppose their construction. She argued that other clean energy options are available to meet Texas′s growing demand -- options like the wind-heavy portfolio put together by panelist and former chairman of the Federal Energy Regulatory Commission, Pat Wood.

David Bonderman, founder of TPG, continually reminded the panel of TXU's agreement on the importance of clean energy, citing its plans to further develop wind and nuclear power. He also pointed to its existing RFP's requesting bids to deploy IGCC (integrated gasification combined cycle) "clean coal" technology.

The problem, he asserted, is that these cannot meet expected near-term energy deficits. Citing projections from the Electric Reliability Council of Texas, Bonderman pointed out that without new capacity, Texas will fall below its desired 12.5 percent reserve level of generating capacity within a few years, and be as low as 5 percent by 2012. This could translate to rolling blackouts and power outages during heat waves.

While the new technologies have the potential to help in the long run, Bonderman stated that uncertainty in technology and lengthy permitting processes mean that deployment of nuclear or IGCC cannot be relied on to meet the near term energy demands -- a claim that Miller disputed.

Miller also took issue with the pricing structure offered by TXU, claiming that the 10 percent rate reduction offered by the utility was insufficient. She argued that while 10 percent was an improvement over nothing, it should not be viewed favorably, given that rates shot up hugely shortly after Hurricane Katrina but never dropped significantly once fuel expenses lowered again. Bonderman countered by pointing out that electricity is priced on marginal production costs, which in Texas means they are "condemned to price against gas for the foreseeable future." And, he said, gas prices remain up 300 percent, while electricity prices have only climbed 20 percent.

Miller also expressed concern that the tremendous debt taken on by TPG and Kohlberg Kravis Roberts & Co (KKR) would lead them to imprudent cost-cutting measures, potentially jeopardizing quality of service in the deregulated Texas utility market. Bonderman answered that "there is nothing in this deal structure which is prohibitive or over-leveraged." However, he said, the biggest and simplest reason for allaying debt concerns is that the "cost of debt is less than the cost of equity." The worst-rated debt is still cheaper than equity, so concerns over how debt quality will affect profitability are unfounded.

Over the course of the discussion, it became clear that the panelists generally agreed upon the importance of cleaner energy technologies for the future of Texas. The disputes centered mainly on details over the form and necessity of new capacity built over the near term. Miller was concerned both about consumer and environmental costs, believing they could both be lower. Citing her status as a public official, she summed up the concerns she was trying to address on behalf of her constituents: "They have to breathe, and they also have to be able to afford electricity." Bonderman declared that TXU would be doing the best possible balancing of both.

Moderators
Maria Bartiromo, Anchor, "Closing Bell with Maria Bartiromo," Managing Editor and Anchor, "The Wall Street Journal Report," CNBC
Speakers
David Bonderman, Principal and Founding Partner, Texas Pacific Group
Laura Miller, Mayor, Dallas, Texas
Pat Wood III, Former Chairman, Federal Energy Regulatory Commission; Independent Energy Developer
2:10 pm - 3:25 pm
Chronic diseases in the United States have an enormous impact on health. This year alone, approximately 5 million Americans will be diagnosed with cancer, heart disease, stroke or diabetes; and 1.5 million will die from one of these conditions.

All these diseases are highly preventable. The fact that they share some of the same risk factors makes a strong argument that coordinated prevention programs have the potential to make great strides in controlling these diseases.

Chronic diseases cause an economic burden as well. Approximately $277.5 billion will be spent on just seven chronic diseases in 2007 in the United States. It's safe to assume that allocating resources toward prevention would be a cost-effective alternative to medical treatments.

When asked to discuss recent trends in chronic disease among insured individuals, Jay Gellert of Health Net Inc. discussed prenatal outcomes, smoking and obesity in California. Although more than 45 percent of births are from Medicaid-eligible mothers, he said, California rates 43rd in the nation for preterm labor/low-birth-weight children, and is in the top 10 for first trimester prenatal care. California also ranks 50th in the nation in smoking.

Tragically, the war on obesity has not been so successful. Comparing the obesity and smoking campaigns, Gellert noted several differences: ads for poor food choices are not as effective as anti-smoking ads; the differential tax for smoking is nonexistent for foods leading to obesity; there was no single massive campaign targeting obesity; campaigns do not address issues like increased access to processed foods for poor populations; and obesity prevention is largely geared toward adults rather than young people.

As a result, Gellert said, California is in the bottom 10 nationally for diabetes prevention. "We have a long way to go in talking about prevention," he concluded.

Much of the debate surrounding prevention has focused on personal responsibility versus societal responsibility. Hala Moddelmog of Susan G. Komen for the Cure stated that "60 to 70 percent of all chronic diseases are preventable through behavioral changes." So why haven't we made further progress? "We get what we pay for and pay attention to," replied Valerie Fleishman of the New England Healthcare Institute. Ironically, less than 5 percent of spending in this country has been allocated for healthy behavior, while health-care spending has increased annually.

The 2008 presidential candidates have focused on universal health care, but the panelists suggested that a broader approach to health care is imperative. Interestingly enough, Fleishman said, residents in Massachusetts were not necessarily any healthier since the state implemented health-care reform. Other determinants must be considered. A conversation on poverty, racism, lack of transportation and unequal access to care must be included in discussions about prevention, as these factors affect behavioral changes in certain populations.

As a possible solution to disease prevention, Wayne Gattinella of WebMD suggested that better information leads to better health. Since 80 percent of U.S. households have Internet access and eight out 10 use the Internet for health information, he suggested using computer-based approaches to aid in preventive health initiatives. He also recommended the adoption of electronic medical records to reduce errors, increase efficiency and increase quality of life.

Gellert mentioned incentives to encourage people to adopt healthier behaviors but cautioned that "incentives in the absence of tools don't work. Tools with community involvement work." Data was presented that showed financial incentives beginning at $100 will interest people in changing their behavior.

The session concluded with moderator Ross DeVol of the Milken Institute asking the panelists to note one aspect of the health-care system they would change. Responses included: using the Internet for health as commonly as it's used for music or checking stocks; increasing the intensity of the war on obesity; changing patent laws so that prevention drugs can be tested; and encouraging scientists and researchers to share data.

Moderators
Ross DeVol, Executive Director, Economic Research, Milken Institute
Speakers
Valerie Fleishman, Chief Operating Officer, New England Healthcare Institute
Wayne Gattinella, President and CEO, WebMD
Jay Gellert, President and CEO, Health Net Inc.
Hala Moddelmog, President and CEO, Susan G. Komen for the Cure
2:10 pm - 3:25 pm
"Rules exist to govern behavior," said Alan Greenspan in 2005, "but rules cannot substitute for character." Businesses today must abide by regulations passed in response to the scandals of the late 1990s and early 2000s. However, while rules may ensure a certain level of responsibility, the panelists indicated that the regulatory changes had not been wholly positive.

At issue was the cost benefit tradeoff for compliance programs -- balancing the costs of compliance against the benefit to shareholders in the long run. The panelists agreed that the new regulations had improved visibility and transparency but also produced some negative consequences. As Jon Woodruff of Goldman Sachs noted, "Rules-based systems come about as a result of problems. ... (They) solve problems and move us in the right direction but create their own problems."

One positive contribution of recent regulations is the increased attention to and discussion of compliance and governance from boards of directors. Woodruff noted "significantly greater recognition within the boardroom of the responsibilities and role of board members." Seth Jaffe of Williams-Sonoma described his company's efforts to implement Section 404 of the Sarbanes-Oxley Act to target risk areas and focus on process improvement within business. Self-policing and debate on boards increased, as well, he said.

However, overemphasis on compliance at the expense of business planning has become a significant problem. Brian Farrell of THQ Inc. said "more time [was being] spent in boardroom on compliance rather than strategy. We need to move back away from total focus on compliance." Efficiency in this new environment is necessary to ensure that the board has time to deal with the business itself after covering appropriate compliance issues.

The panel also addressed concerns about the widespread application of particular criteria, or one rubric, to assess compliance. Although investors may need measures to assess company performance, investor-driven attempts to create a comprehensive approach to evaluate company value may be driving firms to a single corporate governance structure. These changes may result in less than optimal behavioral changes. Gregory Taxin of Glass, Lewis & Co. emphasized the need to "appreciate subtleties of each company′s management team on a company-by-company basis, not on broad-brushed generalities."

The pressure to stay off lists of "badly governed companies" is also exacerbating problems. Performance scoring by research firms focus on how a company performs according to a set of fixed criteria. While some of the criteria do cover important aspects of governance -- such as alignment of shareholder and board member interests -- all criteria are applied, "whether you're a startup biotech or old-style steel manufacture," despite the differences in size, composition and industry focus. Taxin noted that this investor emphasis on a one-size-fits-all rubric may cause companies to "move from the diverse landscape of governance practices they previously had and converge on (these criteria)."

Panel members also tackled the issue of shareholder engagement is such issues as executive compensation. "Shareholders rightly care about exec compensation because we believe that pay drives behavior," said Taxin. "Shareholders are interested to know in what manner execs are incentivized -- toward growth, toward acquisitions or toward selling the company" -- because that incentive will drive executive conduct.

Jaffe noted too that many companies suffer from the lack of feedback mechanisms linking shareholders to the board. He suggested that "the fundamental cure for most corporate ills is disclosure," but other panelists disagreed. "It's fine to have disclosure," countered Taxin, "but there's no way for feedback on that disclosure." While feedback systems exist in commonwealth governments, such as Australia and the UK, these only allow for an advisory or nonbinding vote by shareholders, which do not obligate the board to act on shareholder feedback. "Having a cleaner place for feedback and allowing a market mechanism ... for shareholders to provide feedback ... would both be healthy for public companies and likely stave off any other regulatory action ... which would be in everyone's interest," he argued. "When shareholders object, there ought to be some mechanism by which shareholders can carry the day" regarding representation, major actions and decisions by the board.

Jaffe also reminded the audience that stakeholders need to "separate the drama from the reality." Concerns over corporate governance are legitimate, he said, but only occur in a small number of cases. Woodruff concluded, "We are trying to create a system that addresses problems that occur at 1 percent of companies. We are balancing decisions that prevent big problems in a small subset of companies without negatively impacting all companies."

Moderators
Betsy Zeidman, Director, Center for Emerging Domestic Markets, Research Fellow, Milken Institute
Speakers
Brian Farrell, Chairman, President and CEO, THQ Inc.
Seth Jaffe, Senior Vice President, General Counsel and Secretary, Williams-Sonoma Inc.
Gregory Taxin, CEO, Glass, Lewis & Co. LLC
Jon Woodruff, Head of Global Technology, Media and Telecommunications M&A, Goldman Sachs & Co.
2:10 pm - 3:25 pm
The sad fact is that in some U.S. cities, as many as half of all adults are illiterate. One problem is that many illiterate people have become so good at hiding their problem, they do not get remedial help. Another problem is that most cities, communities and companies are unable to, or can't afford to, provide literacy training. What can organizations do to prevent the growth of illiteracy? What kinds of services can be provided to people who are illiterate? What do we need to do to bring this hidden problem out into the open?
Moderators
Ted Sanders, Chairman and CEO, Cardean Learning Group; former Acting U.S. Secretary of Education
Speakers
George Boggs, President and CEO, American Association of Community Colleges
Joy Chen, Lead Member, Global Human Resources Officers Practice, Heidrick & Struggles
Irving McPhail, Executive Vice President and Chief Operating Officer, National Action Council for Minorities in Engineering (NACME)
2:10 pm - 3:25 pm
Panelists addressed the proliferation of mortgage-backed securities in developed countries, starting in the 1980s, and the various efforts to make them available in developing and emerging countries. They agreed that the spread of such securities would be beneficial for citizens of emerging countries, who could tap their real estate equity for other investments.

It is of no surprise that the United States leads the world, in terms of the amount of mortgage consumed both as a percentage of GDP and outstanding loan amounts. The U.S. also leads in residential mortgages, with nearly six times as many as No. 2 Japan. Residential mortgages allow homeowners to leverage equity and afford larger homes. Additionally, second mortgages are the major source of capital for entrepreneurs, more so than venture capital.

The secondary mortgage industry in the United States took of in the 1980s, after the savings-and-loan crisis and the mandate of the Resolution Trust Corporation to liquidate the assets of insolvent S&Ls. As a result, banks were able to enter the mortgage business and broker deals. These days mortgages represent the largest asset class in the U.S. bond market, having surpassed treasuries. Recent data indicates that 82 percent of mortgages were funded through securitization, compared to 64 percent in 2002 and 49 percent in 1998.

With the rest of the world trailing the United States in the secondary mortgage markets, there exists a tremendous opportunity for firms to develop these markets. Michael Lea of Cardiff Economic Consulting formerly ran the international side of Countrywide's home loan division and headed the company's diversification strategy into the UK. Countrywide decided to enter Europe, he said, because of the region′s established economic and legal infrastructure. However, with the tremendous opportunity for growth in Asia and the push by many governments for home ownership, Countrywide recently moved into India and now employs 2,500 back-office people.

The healthy mortgage market has also migrated to south of the border. According to Guillermo Babatz of Sociedad Hipotecaria Federal, the Mexican government felt the importance of the secondary mortgage markets and has established the legal and economic infrastructures to support this market. Mexicans have little domestic savings to finance mortgage growth over the next few decades, and these secondary markets will help them access foreign and domestic investments. Historically, although home ownership in Mexico has been high, homes are typically bought with cash, and mortgages were very rare. These days, roughly 30 percent of home loan origination in Mexico is through the mortgage markets, a figure that is expected to grow. Additionally, with foreigners investing into the Mexico's secondary market, the risk has shifted away from Mexican institutions, prompting expectations of further growth.

Latin America, and Mexico in particular, remain significant areas for growth in mortgage-backed securities. Reform has built a stronger and larger investor base that is now enjoying economies of scale and scope. With better macroeconomic conditions, competition and more transparency in the Latin American mortgage market, mortgage rates are expected to dramatically decrease and make it less costly for families to purchase homes. And other parts of the developing world offer opportunities as well. In China, for example, mortgages represented only 11 percent of Chinese GDP. However, many experts do not expect much more adoption by the Chinese in the near future for mortgage-backed securities since local banks still hold large reserves that they can lend. However as urbanization increases, demand for housing will increase and the secondary mortgage market will play a huge role.

Panelists said they expect the secondary mortgage markets to play a crucial role in the development of the real estate markets and the local economies of many developed and developing nations in the coming decades.

Moderators
Joel Kurtzman, Senior Fellow, Milken Institute; Executive Director, SAVE; Senior Advisor, Knowledge Universe
Speakers
Guillermo Babatz, CEO, Sociedad Hipotecaria Federal
Theodore Janulis, Managing Director, Global Head of Mortgage Capital, Lehman Brothers
Michael Lea, Principal, Cardiff Economic Consulting
2:10 pm - 3:25 pm
Entrepreneurship is vital to the economic well-being of a nation, the panelists all agreed, and proper financial structures and incentives can facilitate entrepreneurship. The featured speakers, all of whom possessed a combination of entrepreneurial experience and academic knowledge, covered three main topics: 1) the importance of entrepreneurs to an economy; 2) the kinds of people who succeed as entrepreneurs; and 3) the societal factors that facilitate and assist the creation of entrepreneurial ventures.

Carl Schramm noted that in the United States, "one half of all new job creation comes from firms that are less than five years old." This figure indicates just how important the entrepreneur is to a nation′s economic growth, he said. It is important that an economy have a mix of older, larger, more established businesses, as well as newer, smaller, ventures. To that end, a society must create incentives toward productive entrepreneurial behavior, as well as disincentives toward nonproductive behavior.

Though they agreed it was a complex issue, the panelists all felt that one of the keys to defining an entrepreneur is a willingness to take risk. Alan Patricof noted that entrepreneurs are risk-takers by nature. While some innovations and technological breakthroughs can take place at universities, real entrepreneurial activity usually takes place outside the confines of academia.

The societal and environmental factors that promote an entrepreneurial culture break down into two categories. The first of these is access to capital. While there are people everywhere who have good ideas, many of them have no means to bring these ideas to market. Particularly in developing countries, individuals often lack access to the capital necessary to turn their ideas into reality. Many countries lack the institutional mechanisms that allow for profitable exit strategies for investments. In turn, this leads to reluctance to undertake initial investments and provide capital for startups. Improving available exit strategies and access to capital is a key to promoting entrepreneurship around the globe, particularly in developing countries.

The second factor that promotes or hinders an entrepreneurial environment is the stigma attached to business failure. One of the reasons the U.S. enjoys a robust entrepreneurial environment is that the stigma of business failure isn′t lasting. In fact, many individuals whose businesses fail learn from their experiences and go on to start successful business later in their careers. The panel noted that "failure is the mother of success." They noted, however, that in many countries it is seen as shameful to fail at starting a business. By taking steps to change this cultural perception, nations can facilitate a more entrepreneurial culture.

Woven throughout the panel's discussion was the fact that entrepreneurship is a global phenomenon. The panel noted that one of the problems faced by developing economies is that often their brightest minds come to the United States for schooling. These bright young individuals often start companies in the U.S. rather than return to their home countries. A second dimension of the global theme was that every entrepreneur should globalize his or her business from the very start. As an example, Umair Kan noted that there are tremendous cost savings that a startup can achieve by outsourcing development and production.

While the panel discussed a variety of topics, the theme remained the same: Because entrepreneurship is so vital to a country′s economic growth, governments should do everything that they can in order to encourage the activities of entrepreneurs. Schramm noted that entrepreneurs have pulled the United States out of the last five recessions, a mark of how important the entrepreneur is to the national economy.

Moderators
Kenneth Morse, Senior Lecturer and Managing Director, MIT Entrepreneurship Center
Speakers
Umair Khan, Chairman, Folio3
Alan Patricof, Founder and Managing Director, Greycroft LLC
Carl Schramm, President and CEO, Ewing Marion Kauffman Foundation
2:10 pm - 6:15 pm
This session is limited to invited guests. If you are interested in attending, please send an e-mail request to jmeehan@milkeninstitute.org.
2:10 pm - 3:25 pm
In actuality, double bottom line funds have a triple bottom line, said moderator Deborah La Franchi of Strategic Development Funds. Such funds and investment vehicles accomplish three objectives: (1) the generation of market-rate returns for investors; (2) investment in low-income communities to satisfy a social mission; and (3) engagement in environmental and sustainable buildings and activities. However, the panelists stressed repeatedly that these are financially driven investments with secondary and tertiary benefits. This understanding has become increasingly important as the industry has matured and investors compare these returns to the rest of the real estate market. Several years ago, investors did not have same financial expectations.

La Franchi provided an overview of double bottom line funds. Across the industry, she said, $8 billion to $10 billion is currently invested in double bottom line funds. While this is a large number, it is only a fraction of the half a trillion dollars invested in private equity funds. The average size of double bottom line funds ranges from $50 million to $200 million of equity. The investor profile is typically an institutional investor, such as a bank.

Double-bottom line funds were initially created as commercial vehicles for investment banks to obtain Community Reinvestment Act (CRA) credits, said La Franchi. But the driving force has shifted as these investments now create social value without sacrificing on economic value. Today foundations are investing both to achieve mission and see market-rate returns. Similarly, pension funds, such as CalPERS, are increasing their portfolio allocations, and insurance companies are following suit.

All investors have similar priorities, with the first being the expectation for solid returns. The panelists concurred that these are not subsidized investments. The added benefits are job creation, retail service support and the creation of housing to revitalize communities so that further development happens.

The fund managers of double-bottom line funds consist of highly qualified teams of real estate experts who have the capacity to raise capital and work with third-party developers to assist them in redefining projects if need be by bringing them additional expertise to underwrite projects, evaluate contaminated sites, and structure and protect investments. This is not passively managed money; the fund managers are very active investors.

The terminology applied to these types of investments is another important aspect to understanding the industry, as terms range from "socially responsible investing" to "mission-related investing" to "double bottom line." Daniel Beaney of Shamrock Capital Advisors Inc noted that regardless of the terminology; such investments generate appropriate risk-adjust returns and stimulate economic development in low- or moderate-income areas. Shamrock does so by diversifying across property types and investment structures. Under the Genesis Fund, Shamrock initially raised $85 million in 1999 to invest in Los Angeles. Today the fund invests throughout Southern California and achieves mid-teen returns, net to the investors.

Similarly, Lee Winslett of Wells Fargo Bank's Community Investment Department commented that he is focused on the business proposition first and foremost, after which he looks at the second bottom line. Winslett classifies Wells Fargo as a place-based investor, wanting to put money in traditionally overlooked areas and hoping to create a competitive advantage by doing so. Winslett commented that "groups that we fund are probably stronger, as they signed up for a tougher mission and have to please two masters."

Barry Schlesinger of KW Fund Management Group is currently capitalizing three funds: Bay Area Smart Growth Fund, Northwest Louisianan and Puget Sound. To date, KW Fund Management Group has $1.25 billion in double-bottom line product, he said, and has achieved greater than 30 percent IRRs on average. The fund's strategy is to go into markets where it has significant presence and people on the ground. As a result, 75 percent of the deals are done on an off-market basis. The Northwest Louisiana fund is the first rural-focused fund in the country. Schlesinger says he saw a niche market that was underserved and the opportunity for above-average returns. To pursue a social mission as well, Schlesinger's Northwest Louisiana encourages participation from the local investment group by lowering the typical minimum investment requirement of $3 million to $50,000. Further, the fund is providing development experience, intellectual capital and sponsorship, in terms of national companies who will work with local companies to bring them up to a standard that they are not at now. This fund differs from the Puget Sound and Bay Area funds in that it is "more socially involved but it is still economically driven."

Daniel Beaney of Shamrock Capital Advisors Inc provided an additional example to illustrate the success of double bottom line funds; a $20 million investment in South Bay Pavilion in Carson, Calif. In addition to the economic returns, one of social benefits was the creation of 400 jobs, 80 percent of which were filled by Carson residents. The city is a major stakeholder in the project and provided subsidies to the partnership in order to attract tenants who otherwise wouldn,t want to be in this market.

Other projects in the immediate area are now attracting institutional investors as they now realize there is money to be made in this market. There are abundant metrics to evaluate the financial performance of such projects. For Beaney, his role is also to "quantify to the investor base that we are making a meaningful impact in providing jobs for low- to moderate-income people in low- to moderate-income communities"

.

Moderators
Deborah La Franchi, President and CEO, Strategic Development Solutions
Speakers
Daniel Beaney, Managing Director, Shamrock Capital Advisors Inc.
Allan Emkin, Managing Director, Pension Consulting Alliance
Barry Schlesinger, Chairman, KW Fund Management Group
Lee Winslett, Vice President and Fund Manager, Community Investment Department, Wells Fargo Bank
2:10 pm - 3:25 pm
Portable alpha has become a hot topic and allocations to this strategy appear to be increasing at a growing rate as institutional investors search for new ways to obtain alpha in this lower-return environment to meet funding expectations. This roundtable will discuss the growth in interest in portable alpha in terms of "what" exists within the marketplace and the types of institutional investors who are either considering or implementing portable alpha; "why" investors are drawn to portable alpha as a solution for their portfolios and what return expectations look like; and "how" investors are implementing successful programs. The bulk of the discussion will be centered on the "how" in terms of identifying what are the appropriate alpha strategies, determining what alpha sources are suitable within those strategies, identifying and getting the most out of your beta, and the operational considerations and pitfalls that exist within the portable alpha framework.
Speakers
James Dunn, Managing Director, Wilshire Funds Management
Andrew Smith, Partner; Portfolio Manager, Fairfield Greenwich Group
3:30 pm - 4:15 pm
3:35 pm - 4:50 pm
The recent proliferation of hedge funds, going-private transactions and capital overhang in the market has prompted a number of managers to pursue new strategies to achieve target returns. Activist funds, seemingly focused on an old-but-new-again strategy, have received considerable attention. While some draw inevitable comparisons to "raiders" and "takeovers" of the 1980s, this most recent generation of activist investing suggests catalysts that enable companies to realize shareholder value. Managers of today's activist funds do an enormous amount of research on their targets, take large positions in the companies and often take great pains to characterize themselves as friendly. Among the questions panelists will tackle are: Can hedge-fund activism lead to long-term, sustainable value growth? When does a fund become activist - and who are they friendly or hostile to? What's the interplay between private equity and activist funds? How long will a fund involve itself with management, the board and other shareholders? What is the empirical evidence of share-price performance before and after an activist disclosure?
Moderators
Glenn Yago, Director, Capital Studies, Milken Institute
Speakers
David Batchelder, Founder and Principal, Relational Investors LLC
Richard Elden, Principal, Lakeview Investment Manager LLC
Edward Garden, Founding Partner and Portfolio Manager, Trian Fund Management LP
Russell Read, Chief Investment Officer, California Public Employees' Retirement System
Christopher Young, Vice President, Director of M&A Research, Institutional Shareholder Services
3:35 pm - 4:50 pm
While much of the recent press has focused on YouTube, Wikipedia and MySpace, another Internet-based movement may soon eclipse these and other so-called "Web 2.0" companies. If you've never heard of World of Warcraft, Whyville, Second Life or I Love Bees, you're missing what's fueling the Internet's next generation of change -- what some are calling Web3D. In this session, you can engage with experts who are actively creating, studying and living in this brave new world of avatars, telepresence and collective intelligence. We'll discuss what happens when web technologies merge with digital games and virtual worlds, and we'll debate how these immersive environments can redefine personal identity, social behavior, individual learning and civic engagement. Join panelists for some "serious fun" exploring why the future won't be what it used to be.
Moderators
John Kruper, Chief Learning Officer, Cardean Learning Group
Speakers
Wagner James Au, Author, New World Notes
James Bower, Founder, Chairman, and CEO, Numedeon Inc.; Professor, Computational Neuroscience, University of Texas Health Science Center
Jean Miller, Director, International Initiatives, Linden Lab
Constance Steinkuehler, Assistant Professor, University of Wisconsin-Madison
3:35 pm - 4:50 pm
What do you do when your organization is faced with a major crisis? How do you turn things around? Panelists at this session have dealt with some of the most difficult situations imaginable, from 9/11 to Hurricane Katrina. They will talk about how they handled the crisis and kept their organizations going. They and some of the leading practitioners in crisis management will offer their thoughts on the best ways to deal with these situations. For example, what do you do first? Do you own it? Do you ignore it? There are many schools of thought about crisis management, be it an outbreak of E. coli bacteria, a terrorist attack or a natural disaster. How do you turn something bad around and put a positive spin on it?
Moderators
Howard Rubenstein, President, Rubenstein Associates Inc.
Speakers
William Bratton, Chief of Police, Los Angeles Police Department
Scott Cowen, President, Tulane University
Bill Gray, Co-CEO, Ogilvy & Mather
Larry Silverstein, President and CEO, Silverstein Properties
3:35 pm - 4:50 pm
"Latin America has not even been mentioned in previous panels today," announced moderator Martin Guyot of Stark Investments. "Either people don′t know about the countries, or there are no opportunities." Of course, he added, "there are a lot of opportunities in Latin America." The regional economies are growing very fast and inflation is low." For example, he said, "It is mind-boggling how the currencies have appreciated, especially Mexico."

The classification of G7 and emerging markets is converging, and a good example is Brazil," he continued. "The mortgage market is really changing the investment market in emerging economies."

The 1994 economic crisis in Mexico, in which the peso suffered a sudden devaluation, seemed very far away for Latin America, but it basically destroyed the financial system in Mexico, explained Guillermo Babatz of Mexico's Sociedad Hipotecaria Federal (SHF), a state-run mortgage lender. "It took very hard macro-measures to get stabilization going again," he added, and credit didn't pick up until 2002. Now, he added, "we have a very healthy financial sector in Mexico, and mortgages are growing 30 percent each year." The biggest lesson from the crisis, he said, is to be patient because it takes time to have credit flowing into a country again.

The crisis in Argentina in 2002 was the worst of a series of crisis in the 1980s and 1990s, said Miguel Kiguel of Econviews. "It involved a sea change in the way the economy worked, moving from a fixed rate to a flowing exchange rate. ... Deposits fell from 30 percent of GDP to 20 percent of GDP, eliminating long-term credit." It will take a long time in Argentina to rebuild the credit market, he added. "The big obstacle in the development of the mortgage market is the lack of stability."

During the past 10 years, Brazil's president, Luiz Inacio Lula da Silva, has been a great surprise with his market-oriented reforms, said Guyot. "In Brazil we are living in a Second Life game -- we have had to invent everything in the last few years." Interest rates are decreasing, from 23 percent in 2003 to 15 percent in 2006, thanks to the stabilization plan the government has imposed. Wealth is extremely concentrated, which "leads to a lot of opportunities in the high and medium economic sectors."

"Issues of division are a hot topic in Latin America in the past years -- we see Mexico, Colombia and Chile on one side and Venezuela and Bolivia in another," continued Guyot, switching to a discussion of politics. Thomas "Mack" McLarty noted the number of close elections taking place in Latin America. "There is a very clear divide regarding the United States," he said, adding that the Iraq war has been a very big negative in terms of relationships, lessening the focus of the administration on the region. "The elections are very mixed today. Mexico's president, moderately conservative, is doing a great job. Even in Peru, there is an anti-Chavez result with (President) Alan Garcia." In general, he said, the public has a higher ownership in the election systems, even with corruption issues. "There have been very seamless transfers of power from one party to the other, which is a great thing for the region -- even the U.S. could learn of these."

The mortgage market in Mexico "has been growing quickly in the past five to six years," said Babatz, at around a yearly 27.3 percent growth. All the lending before was financed by the SHF. However, "the growth in the system comes from other sources of finance, making it self-sustainable. ... And delinquent portfolios are relatively low, people pay on time." Today, the lending market is robust, but still pretty small for the size of Mexico. "We need to watch out," Babatz warned. "With this kind of growth rate, you need a lot of regulation in the system."

Of the Argentinean mortgage market, Kiguel noted that the size of mortgage market in the 1990s was 4 percent of GDP, and "they were all in dollars." However, the mortgage market collapsed as the result of the crisis and fell by 60 percent. The reasons were macroeconomic, he said. There was a real estate boom in dollars in the higher end of the market; however wages in dollars went down. Properties became unaffordable for most people. "The purchasing power of wages is now the lowest historically," he added. Interest rates in Argentina pose another problem. "Argentina does not have an index instrument at the moment, which makes the growth of the market very difficult."

Luis Largman noted that in Brazil, "the ratios of mortgages to GDP is very low, only at 2 percent," attributable to macroeconomic causes, "real interest problems and undervalued properties" (in Rio de Janeiro, for example, from 1994 to 2005 land did not appreciate at all.

Government tends to be the main driver in the mortgage market, said Guyot, and Babatz noted that a big part of the boom in the Mexican market has to do with the Infonavit, a government institution that is the largest lender of mortgage loans. Until 1993, it was a corrupt institution, but in 2000, new management created a well-oiled machine that has since created a huge market. The SHF as a wholesale lender, is another driver in Mexico and has lately become a catalyzer of mortgage securities in the country. It has even started securitizing loans. Still, Babatz argued that the only way for Mexico to continue growing the mortgage market is through the international capital markets. "We looked very closely at the U.S. and tried to replicate it," he said, "taking advantage of the new financial technology incorporating private entities into the process."

Access to credit information remains a problem in Latin America. In Argentina, Kiguel said, government interference has made access difficult, though the situation is much better in Brazil, where information comes through the central bank.

The United States sees Mexico and Central America as important markets, said McLarty, and is very interested in helping develop the mortgage sector. "You will see continuous capital flows to help finance the markets in the future," he predicted, "even in southern countries like Brazil and Argentina." But Babatz warned that "before any country in Latin America dreams of having a mortgage market, they need to have a local currency long-term curve for government securities." If not, he said, it will require indexation, which can put the country in problems. Guyot concluded the discussion on a high note, saying that "the social effects of the mortgage markets are impressive. We are in front of a huge potential growth of the market for investors. The mortgage market in Latin America is here to stay."

Moderators
Martin Guyot, Director of Emerging Markets Trading, Stark Investments
Speakers
Guillermo Babatz, CEO, Sociedad Hipotecaria Federal
Miguel Kiguel, Director, EconViews
Luis Largman, Chief Financial Officer and Investor Relations Officer, Cyrela Brazil Realty S.A. Empreendimentos e Participaes
Thomas "Mack" McLarty, President, Kissinger McLarty Associates; former Chief of Staff, Clinton Administration
3:35 pm - 4:50 pm
For five decades, business has been sidelined from discussions of economic development in Africa. The terrain has been dominated instead by rival geopolitical forces, well-meaning international development agencies and non-governmental organizations for which the private sector was an alien phenomenon - at best irrelevant and at worst exploitive. Today the role of the private sector in international development, and the importance of transparency and good governance to economic development, have taken center stage. Discussions have gone beyond increasing aid and debt-forgiveness. The new focus is on the large "missing middle" - investments between World Bank project finance and micro-lending - that is occupied by job-creating small- and medium-sized firms. China and India, in particular, have opened a new silk road to Africa. What are U.S. companies and financiers waiting for? Those intimate with Africa's problems and opportunities will talk about how they see transparency and governance from a truly African perspective.
Moderators
Laurance Allen, Editor and Publisher, ValueNewsNetwork.com
Speakers
Caleb Fundanga, Governor, Bank of Zambia
Mehret Mandefro, Founding Director, TruthAIDS
Eric Osiakwan, Executive Secretary, African Internet Service Providers Association and Ghana Internet Service Providers Association
Gladwell Otieno, Founding Member, Africa Center for Open Governance (AfriCOG); former head of Transparency International (Kenya)
3:35 pm - 4:50 pm
"I see gang violence as a humanitarian crisis in U.S cities," said Gary Slutkin of the University of Illinois School of Public Health. Seen from that perspective, Los Angeles, with some 38,000 active gang members, hosts one of the greatest humanitarian crises in the nation.

While the panelists acknowledged the serious challenge posed by reducing gang violence in Los Angeles, they expressed a uniform optimism that a "comprehensive wrap-around strategy" could transform the city's most dangerous neighborhoods. Los Angeles City Attorney Rocky Delgadillo outlined the wrap-around strategy as a three-pronged approach.

The first prong, he said, is prevention. "Gang members have a shelf life," he explained. "If we can stop the kids right now from joining gangs, we won′t have a problem with gang violence in ten years." He stressed the importance of working with parents and schools to provide children with viable alternatives to joining a gang.

The second prong is suppression. "We can′t arrest our way out of this problem," said the city attorney. "However, we need the pressure to make the prevention programs and the intervention programs work." Delgadillo said that his use of gang injunctions has reduced Los Angeles′s gang population from 57,000 to 38,000.

The third prong is eradication. Delgadillo advocated removing the gangs' monetary power by filing civil suits against them for damages they cause to neighborhoods and then using the settlement money to improve those neighborhoods. He said he currently has a bill pending that would allow him to file civil suits against gangs.

Constance Rice, Co-Director of the Advancement Project, noted that Los Angeles spends over a billion dollars a year in salaries for city employees involved in youth development. She recommended bringing these workers together and holding them accountable for reducing gang violence. This could be done, she said, by bringing a combination of agencies -- from the LAPD to Child and Protective Services and the Department of Parks and Recreation -- into each neighborhood that suffers from gang violence and developing a community action plan with neighborhood leaders.

Rice said that only 5 percent to 8 percent of gang members are perpetually violent, and that the problem is mostly a result of teenagers seeking validation. "The kids identify and validate themselves by finding power in joining the clique," she said, "but it′s a 'Clockwork Orange' clique. If you don't give kids a way to affirm their adolescence, they'll find this 'Clockwork Orange' way of doing it."

Rice challenged the audience to become involved as well, adding that the lack of public oversight and political will has not pushed the relevant agencies to perform and has kept the necessary resources from the reaching the problem.

In addition to being a professor of epidemiology, Slutkin serves as co-director of a highly successful Chicago gang-violence reduction program called CeaseFire. He spoke about gang violence as a public health problem and his development of solutions within the public health framework. Slutkin's program has successfully changed norms and behaviors in neighborhoods with high levels of gang violence by using former gang members to influence their peers still involved in gangs.

"Humans respond to messengers most credible to them," he said. "The most credible people to offenders are ex-offenders whom they know and believe and trust very well." Slutkin has combined this mentoring program with larger communitywide efforts designed to stigmatize violence to dramatic effect -- having reduced violence by 60 percent in the targeted neighborhoods.

Moderators
David Fleming, Counsel, Environment, Land and Resources Department, Latham & Watkins
Speakers
Rocky Delgadillo, City Attorney, Los Angeles
Constance Rice, Co-Director, Advancement Project
Gary Slutkin, Professor, Epidemiology and International Health, School of Public Health, University of Illinois; Director, CeaseFire Chicago
3:35 pm - 4:50 pm
The Food and Drug Administration, responsible for regulating food, dietary supplements, cosmetics, drugs, and medical devices, makes decisions that touch our lives on a daily basis and with everyday products. But in recent years, the role of FDA in drug approval has become a point of contention as both consumers and the business community question the speed of drug approval and the perceived safety of new drugs.

After the Vioxx scandal, the Institute of Medicine submitted a report, "The Future of Drug Safety," and offered recommendations for restructuring the FDA in order to meet demands of the 21st century. This panel examined whether the FDA can undergo changes in time to meet these growing demands.

Greg Simon of FasterCures reminded the audience that the challenge of drug approvals has changed, from protecting the public from "drugs that have no benefit at all" protecting us from "drugs that cause harm to some and benefit others." The key tension in this process, as David Meltzer of the Institute of Medicine, explained, is that "you can make mistakes approving drugs that kill people, as well as not approving drugs that save people."

According to David Gratzer from Manhattan Institute, "all political incentives on the part of FDA are to be too cautious." As a result, the agency has become too "safety-conscious" and averse to change. Gratzer compared FDA's outdated and ineffective drug approval process with the tenure process in academia, saying it "places too much emphasis on lengthy clinical trials," with no formal monitoring of after the drug approval process.

Andrew von Eschenbach, the current FDA commissioner, agreed that the FDA′s operation is "woefully inadequate" for the new century. To address the lack of formal monitoring after the drug approval, more feedback is needed from physicians prescribing the drug and observing patients in the field, he said. By some estimates, fewer than 1 percent of doctors report side effects back to the FDA. Von Eschenbach also said that the FDA often does not have adequate informational resources to make good decisions. These shortcomings range from the fact that many processes within the FDA are still not digitized to a lack of tools for more precise testing and tracking of factors that trigger side effects.

Beth Seidenberg of KPCB weighed in from the venture capital side, noting that several companies she is working with have the technology to address personalized predictions for drug interactions based on molecular technology and biomarkers. She believes that a "personalized medicine" approach based on these tools is possible and would be much more effective than the current way of "treating diseases of the populations." However, she cautioned that the FDA needs personnel with technical skills in "basic science, information technology and bioengineering" in order to be "thought partners" with venture capital.

Von Eschenbach noted that to realize this vision, a "profound change" needs to take place not just at his agency, but across the medical field, from drug discovery to doctor's office. Standardization and digitization of data available to the FDA and physicians is the top priority in making this process efficient and safe. Though this may sound simple to accomplish, he warned that there are a host of complexities, not the least of which is privacy of medical information. In addition, Simon noted, this overhaul will require funding. He asked the panelists whether they think the FDA needs a boost to its annual budget of $1 billion. The panelists were divided on whether the increase in funding was necessary, with Gratzer and Seidenberg believing that restructuring can be done in place and von Eschenbach and Meltzer less optimistic.

Simon threw out a proposal for a new drug approval process proposal for reaction. Since every drug hurts someone but may benefit many others, he suggested, we can introduce drugs to the market for a trial of several years, during which time we limit direct-to-consumer advertising and off-label sales, and use proceeds to create a fund for people shown to be harmed by the drug. Meanwhile, we will have access to a higher population than during any clinical trial and can collect data on the real side effects of the drug.

Grazer and Meltzer agreed that this plan would achieve desired results and was worth considering, but von Eschenbach expressed caution, stating that he believed a more radical change is possible that will provide both speed and safety of the drug without limiting information available to consumers.

Moderators
Greg Simon, President, FasterCures / The Center for Accelerating Medical Solutions
Speakers
David Gratzer, Senior Fellow, Center for Medical Progress, Manhattan Institute
David Meltzer, Associate Professor, Department of Medicine; Associated Faculty Member, Harris School and the Department of Economics, University of Chicago
Beth Seidenberg, Partner, Kleiner Perkins Caufield & Byers
Andrew von Eschenbach, Commissioner, U.S. Food and Drug Administration
3:35 pm - 4:50 pm
Moderator Felicia Thornton, CEO of Knowledge Universe Education U.S., opened the session ready to tackle some of the major questions surrounding preschool education. Matters involving teacher qualification, public and private delivery models, school program characteristics and the economics of funding a preschool education were just some of the issues she laid out for panelists to discuss.

On the topic of teacher qualifications, Eric Karolak, Executive Director of the Early Care and Education Consortium, reported that a bachelor of arts degree, long recognized as a desired requirement for lead teachers, essentially has no bearing on student outcomes. Noting that "there are plenty of people with bachelor's degrees," he said that "the question is, do they have a background in early childhood, are they willing to work in early childhood industry, and are they able to be retained?"

Karolak urged policy-makers to move away from their gut reactions of what "feels" right for children and to learn more about what is supported in the research -- which is that "there is no clear pattern of an impact on program quality or child outcomes from the B.A. as standard for the teacher." Therefore, when resources are scarce, he said, decisions should be made that yield the highest return of investment for whatever the true standards are, and this should be supported by evidence.

From the economic perspective of an investment banker, Charles Edelstein, Managing Director and Head of Credit Suisse's Global Services Group, said, "When you demonstrate to people that it's profitable to do something, money will flow to it and more of that activity will happen." His experience has shown that investors consider the leadership of the organization to be the primary indicator of the types of returns they will see, both at the preschool and K-12 levels. He explained that "a dynamic leader of an organization will hire the right people and will focus on the right things." Even though some of the returns on investment may not be immediate, Edelstein said, it is especially important to help people, (especially in the United States) understand the magnitude of the returns when investing in early education. On average China spends $6,000 to $10,000 on early childhood education, in comparison to the $3,900 spent in the United States.

Sabah Al-Haidoos, Director of the Education Institute, shared some of his experiences and the changes taking place in Qatar. He mentioned that considerable money is being invested in early education in his country because the goal is to combine a preschool with each elementary school as a way of preparing students for the system ahead. This model is soon to be extended to children between the ages of 3 and 6 years. "Students will be socialized, educated and prepared for the school system, grades 1 through 12," Haidoos said. In addition, the teachers will have dual functions as trainers and mentors. Ultimately, these goals are in place to ensure that the students of Qatar will be equipped and ready to compete with their peers around the world.

Gary Mangiofico, CEO of Los Angeles Universal Preschool, stated that in Los Angeles, 80 percent of the preschool market is supported by the private sector. In Los Angeles County, the volume of the preschool market compares with that of the spending in women′s retail, at a billion dollars. However, when compared to the national average of 66 percent, only 50 percent of L.A. County's 4-year-olds are in preschool. As it stands, approximately 75,000-80,000 of those children lack access to preschool for a variety of reasons. Although much has been done to approve upon these factors, "clearly there isn′t the public appetite right now to fund a universal system on a total public dollar," he said. Mangiofico estimated that the cost in LA County alone would probably run somewhere between $1.3 billion and $1.4 billion a year."

With respect to returns on investment from a social capital perspective, Mangiofico argued that "we're talking about the decreased spending in the future as a result of making investments today, because children who go to preschool have less need for special education." The dropout rate is lower, delinquency rates drop, these students attend college, and they become higher wage earners, he added, reminding the audience that the question is, would we rather spend $90 million in operations in one year for 14,000 additional spaces in the county's preschools, or socially spend $234 million over the course of 18 years?

Moderators
Felicia Thornton, CEO, Knowledge Universe Education, U.S.
Speakers
Adam Ahmad Al Saadi, Senior Officer, Office of Independent Schools, Supreme Education Council
Charles Edelstein, Managing Director, Head of Global Services Group, Investment Banking, Credit Suisse
Eric Karolak, Executive Director, Early Care and Education Consortium
Gary Mangiofico, CEO, Los Angeles Universal Preschool
3:35 pm - 4:50 pm
As the world's fourth-largest economy, China has been growing at a 10 percent annual rate for more than two decades. However, the lack of timely, accurate and detailed economic data has long concerned investors and researchers. Without this transparency, how can we benchmark Chinese companies and industries against their international counterparts? How can we evaluate the risks in investing in China? And more important, how can the data collection and disclosure procedures in China more closely conform to international standards? The launch last year of the Xinhua Finance/Milken Institute China Indicators revealed a great deal of interest in deciphering and demystifying China's markets. This discussion will focus on these issues, which are critical to investors and observers alike.
Moderators
Perry Wong, Senior Managing Economist, Milken Institute
Speakers
James Barth, Lowder Eminent Scholar in Finance, Auburn University; Senior Fellow, Milken Institute
William Kazer, Managing Editor, Xinhua Finance
Bruce Richardson, Managing Director, Research and Business Development, Xinhua Finance
Huiyao Wang, Chairman, China Western Returned Scholars Association Chamber of Commerce
3:35 pm - 4:50 pm
The use of stem cells in medical research has become one of the most divisive political issues of our time. This year, for example, the State of California will fund embryonic stem cell (ESC) research at a level more than five times higher than that of the federal government. This funding discrepancy is indicative of a struggle over the highly charged issues involved -- President Bush has twice vetoed bills supporting ESC research and restricted ESC to 21 specific stem cell lines of such deficient quality that "some scientists thing that they′ll never be suitable for clinical use." So said author Eve Herold of the Genetics Policy Institute. In an unabashed pro-ESC session, she, Pete Coffee of University College London and Robert Klein of the California Institute for Regenerative Medicine discussed the political controversy, life-saving potential and the way forward for stem cell research.

Herold provided an overview of the stem cell controversy, explaining the political environment and relating scientific issues to the ethical issues involved. She pointed out several alternative views of the ethical status of embryos and how they related to different policy stances on the issue -- specifically, that those who view embryos as full-fledged human beings tend to fall under the umbrella of Catholics and evangelical protestants opposed to abortion.

However, she pointed out, there is a significant distinction "between an embryo outside the body and a pregnancy under way." She relayed a lesser-known fact that embryos used at the stage of stem cell research have only 30 percent to 40 percent chance of leading to a successful pregnancy, even under the best conditions. Furthermore, she argued, such an embryo has no differentiated nerve cells, and thus there is no way the embryo could experience either consciousness or pain. Rather, she advanced a more nuanced view that embryos outside the womb occupy "a special moral space," a concept that is important in determining how to balance the potentially tremendous life-saving gains from ESC against concerns over the destruction of human life.

While significant controversy over the ethics of stem cell research bubbles at the federal level, some U.S. states and other nations are moving on. Referring to the session title, Coffey pointed out that "in the UK, there is no war. The government is very proactive in promoting and continuing stem cell research." Citing the UK's establishment of a stem cell bank and funding of 78 research projects over the past three years, he described how his research in vision restoration could benefit greatly from human embryonic stem cell research.

Robert Klein, however, needed no convincing. He heads the newly founded California Institute for Regenerative Medicine, which emerged from the passage of Proposition 71 in 2004. CIRM has the task of responsibly allocating the $3 billion in research funds secured by the proposition. Klein says California's leadership role in stem cell research is so large that other nations are dealing directly with the state because they cannot deal with the current administration. California was invited to the International Stem Cell Forum, in which all other participants were nation-states. When it comes to stem cell research, he said, "California is serving as a surrogate (and) replacement for our country."

Overall, the panelists recognized the need for expanding embryonic stem cell research and the hope of new cures it would provide. States advancing their own research agendas, and advocates working to clear away common myths about stem cell research, were both important. In the end, stable funding is the key for this emerging science, and it is important for states and philanthropists around the world to advance the cause without waiting for the federal government and profit-seeking corporations. As moderator Roger Ashby put it: "The drug companies are hiding in the wings, allowing science to progress by donations and by charitable people." Once it has advanced sufficiently, they will step in, and all parties will eventually play an important role. After all, he added, "this is a race against disease. This not a race against states or against nations."

Moderators
Roger Ashby, CEO, StemCell Ventures
Speakers
Pete Coffey, Professor of Cellular Therapy and Visual Sciences, Institute of Ophthalmology, University College London
Eve Herold, Director of Public Policy Research and Education, Genetics Policy Institute
Robert Klein, Chairman, Independent Citizens Oversight Committee, California Institute for Regenerative Medicine
5:00 pm - 6:15 pm

They were once some of the most recognized public companies in America: Reader's Digest, Dunkin' Donuts, Toys-R-Us, Neiman Marcus and Metro-Goldwyn-Mayer. No more. As part of a trend of mergers and acquisitions, these companies were bought by some of the largest private-equity firms in America. Once feared, these private-equity firms have changed their image and are now viewed by many as financial saviors, paying good money for underperforming companies and turning them around. And they are averaging 13 percent returns in the past two decades, which is good for institutional investors. Of course, not everyone views them so positively. Flush with money, and running short on targets, these investors have become more aggressive in their search for firms to buy, which has raised concerns with regulatory agencies both within and outside the U.S. Bottom line: Are private equity firms a help or a hindrance to the economy? Either way, what's driving this trend? Is it overregulation (i.e. Sarbanes-Oxley) or just cheap debt that makes such deals more doable?

Moderators
Maria Bartiromo, Anchor, "Closing Bell with Maria Bartiromo," Managing Editor and Anchor, "The Wall Street Journal Report," CNBC
Speakers
Leon Black, Founding Partner, Apollo Advisors LP
David Bonderman, Principal and Founding Partner, Texas Pacific Group
Thomas Lee, President and CEO, Thomas H. Lee Capital LLC
David Rubenstein, Managing Director, The Carlyle Group
5:00 pm - 5:30 pm
6:15 pm - 7:15 pm
This private reception is reserved for speakers and sponsors.
6:15 pm - 7:15 pm
7:15 pm - 9:00 pm
The dinner panel on "Politics 2008" brought up a series of important issues that presidential candidates will face in the upcoming election season, as well as questions about the primary elections, the U.S. role in the global arena, immigration and health care. By far, the war in Iraq remained the most important topic.

Moderator Roger Ailes started the discussion with the question on what is going to be an impact at primary elections this year. Speakers agreed that it would be difficult for upstart campaigns to raise money for the primary elections, though they did suggest that unexpected newcomers, such as Republican Jack Abrams (who took stand against the war) could enter race at a later stage. Williams Frist predicted that Republican Fred Thompson, a good communicator, would be able to capture the public's imaginations and seize the opportunity to raise campaign funds.

The panelists were asked whether the United States is perceived as a "strong horse" or "a weak horse," and their answers varied. Arianna Huffington argued that the world sees the U.S. as a weak horse, much weaker than it was seen in September 2001. Poor foreign policy management, she said, "will probably have the greatest long-term impact of Bush administration."

Frist stressed that "in terms of well-functioning, transparent economy, we are strong." For instance, the U.S. still has a strong standing because of its actions in African countries. "Using health, education and clean water as a currency for peace" is a great approach, he said, and we should be doing the same in other areas of the world.

Mortimer Zuckerman stated that "soft power is clearly an area in which we′ve declined, particularly in the Middle East, and in every country in Europe."

How would candidates tackle the Bush administration′s handling of the war in Iraq? According to Kenneth Mehlman, "those in business know if you lay out a strategy and it doesn't work, you switch strategies." It helps changing strategies as you go, he added, and continuing "to go down a path that's not working" is not the best solution. "[We′re] going to try to create stable enough place where different groups of people can live," he said, "and, hopefully, eventually, they will want to live as one."

Mehlman also noted that the president needs to be honest about how long the war effort will take. "Until then," he warned, "public determination and willingness to stay the course will continue to wane."

Huffington agreed, saying that "ignoring mounting evidence that surge isn′t working, policy isn't working and staying this course, you're harming the country." That, she insisted, is why people are asking for the timetable. Panelists named Fred Thompson and Barack Obama as the party candidates most likely to win the 2008 elections.

Ailes asked the group if they thought if a ground war with radical Muslims could take place in the first two years of the next presidency. Most of the panelists believe that there was such a likelihood, though they noted that they didn't consider such a war "the end of civilization." Frist noted that America needs to recognize that the world is different today, and that the "greatest existential threat is a biological terrorism" -- a threat we are inadequately prepared to meet.

Returning to the topic of elections, Huffington noted that candidates must realize that presidential campaigns today are different from campaigns of the Nineties. Hillary Clinton's campaign is not inevitable and all-powerful, she said; the public is not content to sit through calculated statements and sound bytes. The Internet and bloggers play important campaign season roles, she said, noting that the blogosphere is "a kind of court of appeals." Mehlman added that Barack Obama has taken a campaign approach similar to that employed by Bobby Kennedy and Ronald Reagan, who "told what they perceived to be the truth, and people believed them." Candidates need to stop spending time on charts and tactics, start spending more time on thinking to be able to accomplish incredible things."

The panelists agreed that health care will remain as one of the important issues in the election campaign season. "Medicare tells much of story of unfunded liability over the next 75 years," said Frist. In the next 30 years, the number of seniors will double, but Medicare is expected to go bankrupt before Social Security does. Huffington warned that candidates must focus on providing preventive care and Medicare, without which we can not change the health-care crisis.

Moderators
Roger Ailes, Chairman and CEO, Fox News
Introduction By
Michael Klowden, President and CEO, Milken Institute
Speakers
Harold Ford Jr., Former Congressman; Chairman, Democratic Leadership Council
William Frist, Former Majority Leader, U.S. Senate
Arianna Huffington, Co-Founder and Editor-in-Chief, The Huffington Post
Kenneth Mehlman, Partner, Akin Gump Strauss Hauer & Feld LLP; former Chairman, Republican National Committee
Mortimer Zuckerman, Chairman and Editor-in-Chief, U.S. News & World Report; Publisher, New York Daily News
9:00 pm - 10:00 pm
This session is by "invitation only" and is limited to invited guests. If you are interested in attending, please send an e-mail request to jmeehan@milkeninstitute.org.
Speakers
Ross Levinsohn, former President, Fox Interactive
Jonathan Miller, former Chairman and CEO, AOL
Wednesday, April 25, 2007
6:30 am - 3:00 pm
6:30 am - 7:45 am
This session is by "invitation only" and is limited to invited guests. If you are interested in attending, please send an e-mail request to jmeehan@milkeninstitute.org.
6:30 am - 8:45 am
6:30 am - 7:45 am
This session is limited to invited guests. If you are interested in attending, please send an e-mail request to jmeehan@milkeninstitute.org.
Speakers
Paul Antony, Chief Medical Officer, Pharmaceutical Research and Manufacturers of America
6:30 am - 7:45 am
"It′s not what you say, it's what they hear" said speaker Frank Luntz, founder and CEO of Luntz, Maslansky Strategic Research. In today's culture, words do matter. From politics to business to media to medicine, words have the potential to arouse fear, calm fears, win elections, lose elections, start and end wars. Yet many people use words that are misconstrued by their listeners.

These days "you have to be striking, in their face, for people to pay attention," advised Luntz. Often using politics as an example, he noted that "the American people don't pay attention to politics." So it should not be surprising, he added, that 67 percent of Americans can name the Three Stooges, but only 17 percent can name three Supreme Court justices. The remedy? "If people don't care, you have to find some way to reach them." Luntz's solution is not to "dumb down," but to talk in their language.

Many people make the mistake of focusing on results, and not the process, he said. This is especially unproductive because people react to the purpose, not the process. For example, when asked how much are we spending on "welfare," 23 percent of his survey respondents said "too little." But when asked how much we spend on "assistance to the poor," 68 percent said "too little."

He stressed the importance of focusing on principles. Begin a statement with "as a matter of principle" because this suggests something more than convictions or beliefs.

On his must-have list of words to use when speaking in public, Luntz felt the most important was "imagine" because it allows for a responsive cord -- meaning that you put the focus on people and let them answer your questions, or you put your thoughts into someone else′s perspectives. "Accountability" is the No. 1 word in politics, and "innovation" is the best word to use when discussing economic issues because it implies success or future focus. Other key words were "peace of mind," "certified," "consequences," "the good life," "lifestyle, "hassle-free" and "all-American."

On the other hand, Luntz provided a list of words/phrases that should never be used. For example, instead of "government." say "Washington." Say "illegal immigrants" or "border security" instead of "undocumented workers" or "aliens." Use "tax simplification" instead of "tax reform." Thirty-one percent of Americans favored the "privatization of social security," he said, while 54 percent supported the "personalization of social security." Both terms say the same thing, but people infer different meanings based on the choice of words.

When asked to define the "American Dream," 33 percent of respondents stated achieving financial success, while 22 percent said home ownership. Of note, most Latinos equate home ownership with success, said Luntz, to illustrate that just as important as your choice of words is your target audience. Word meanings differ by the race/ethnicity, gender, age and social status of your audience.

With public scandals and failures rampant in the political world, the 2008 presidential election outcome will largely be determined by the nominees′ ability to communicate, he said, noting, "Language matters -- if you cannot defend what you believe, how can you expect the American people to support it?"

Speakers
Frank Luntz, Founder and CEO, Luntz, Maslansky Strategic Research
6:30 am - 7:45 am


This discussion was highlighted by frequent debate between Steven Green of Greenstreet Partners and Mark Karlan of CB Richard Ellis Investors. Yet while the two panelists often disagreed, there was unanimity on one subject: real estate development in Asia is growing at unprecedented rates. In the words of moderator Perry Wong, "the market will be rising in terms of revenue stream and building activity very rapidly."

In Asia are found the three fastest-growing large economies in the world: China, India and South Korea. The continent will soon be home to the No. 2 and No. 3 economies in terms of GDP, if China jumps to No. 3 in the next two years, as is widely predicted. "In Asia you also have size," said Karlan, referring to the size of the real estate transaction market.

Discussing Asian real estate investment as a whole is difficult, if not impossible. "Asia has a remarkably diverse set of economies and real estate markets," noted Karlan. You can't look at any one of them and extrapolate across the region.

The panel focused largely on China, mostly because of its rapid real estate volume growth and its improving infrastructure. Karlan maintained that "China has accomplished, compared to India, far more in terms of infrastructure and facilitating the investment in real estate." Roads are great, he said, and airports are good. India is one-quarter the size of China, in terms of GDP, and there are relatively small volumes of real estate in India.

Wong said that that if we "look at the conversion in the past 20 years from the rural to urban setting (in China), one thing is almost a certainty: there are many more cities to build, more office space to set up." In fact, he added, China needs to build four cities the size of Boston every year. According to the panel, in the 1990s, more than half of the world's high-rise cranes where located in Shanghai.

But investment risks -- posed by politics and instability in the region -- should not to be underestimated. Karlan emphasized that information for due diligence is much less available in Asia, and that market transparency is a real issue. The data that does exist may or may not be accurate, so local knowledge is essential for "reality checks."

Green added that laws about property rights and enforcement are often ambiguous in Asia. For instance, he asked, "Are you selling ownership, are you selling occupancy? What the heck are you selling?" He noted that in the Chinese alphabet the same character that represents opportunity also represents danger. Though there are great opportunities, he added, the political environment is more of a question. As Asian countries prosper, investors must ask themselves, "What is the impact of affluence on political and social change?"

Green was particularly cautious about real estate investment in China. "There′s a saying that people are not afraid of risk -- they are afraid of missing an opportunity. This may well be the case in China," he said. Citing the financial crisis of 1997, he warned that "we should be very much aware of what drove (that crisis) and ask ourselves, 'What's different?'" He is not convinced that there has been enough structural reform in China to prevent the situation from repeating.

Karlan argued that the crisis of 1997 was caused by liquidity shortages, and that this is no longer an issue for Asia because China can support a crash with its reserves. He also noted that China's banks now have highest foreign exchange reserves in the world. Furthermore, he said, China's economy is poised for sustained growth. Only one of world's five largest IPOs have been in U.S. dollars. Three have been in RMB (including the largest in history, the Industrial and Commercial Bank of China), and all of those are banks that Karlan said would be profitable "if real estate is profitable." He looks at these banks as proxies for the real estate market and believes their success is a testament to the future of real estate in China.

The Chinese currency is undervalued by 8 percent to 30 percent, Karlan added, saying that he expects the currency to rise relative to dollar. Thus, you can get into China and acquire assets today, you are going to see additional gains. He maintained that there is definitely liquidity in this market and countered Green's skepticism about real estate in China by pointing out that many investment firms are willing to disclose their financials and that the results are clear -- they have been profitable in China. He conceded that there are still challenges with exit, in terms of convertible currency and the like, but did not believe that this problem was prohibitive.

Ultimately, the debate about real estate investment in China came down to different assessments of the risks in the region. Green concluded that "it's a very different China (today), but I'm still saying that there are a lot of political risks." China is overly dependent on U.S. consumer sentiment toward the region, he insisted, and political movement exists in the U.S. to push back on the amount of goods imported from China. Wong agreed that risk is high, arguing that since world is more integrated economically than in 1997, the risk is higher. Karlan again pointed out that opportunities abound, saying that the largest shopping centers in the world are in China -- and they are already full. That, he argued, is in itself is a strong advertisement for the region's booming economy.

Moderators
Perry Wong, Senior Managing Economist, Milken Institute
Speakers
Steven Green, Former U.S. Ambassador to the Republic of Singapore; Managing Director, Greenstreet Partners
Mark Karlan, Executive Managing Director, CB Richard Ellis Investors
7:45 am - 8:15 am
7:55 am - 9:10 am
A confluence of factors is shaping the dynamic state of global markets today. Simultaneous growth in the four major economic regions of the world, the introduction of new financial instruments to diversify risk and the growing influence of private equity account for the changing landscape of global markets. With the Dow exceeding 13,000, the global investment climate certainly looks rosy. Will the good times continue, or have we reached an investment bubble?

Francois Pages of Calyon Securities pinpointed one of the major determinants of the changing global investment terrain as "a huge transfer of wealth over the past couple of years from Western countries, as well as Japan, to emerging markets." In 2005, he said, foreign investment inflow into emerging markets exceeded $700 billion. In addition to this huge transfer of wealth, all four major economic areas in the world are growing at the same time, a phenomenon that Stefan Green of Goldman Sachs said has not been seen in more than 15 years.

Todd Boehly of Guggenheim Partners highlighted another major strand in the fabric of global markets: the diversification of financial products. The combination of private equity and credit markets has resulted in what Boehly called "a game of musical chairs," where the definition of financial products is changing every day. Private equity is taking a larger share of global M&A activity, accounting for 22 percent in 2006. One major reason for the increasing role of private equity is the fact that many companies who seek capital, or need to make significant changes, are seeking the flexibility that private investment offers. With many public companies suffering under the weight of onerous public scrutiny and litigation, the incentives to reduce public ownership shares have increased the demand for private investment.

Various investment instruments have distributed risk all over the world in the past seven years, facilitating the flow of capital from the West to emerging market areas. Panelists agreed that collateralized bond obligations (CBOs) and collateralized loan obligations (CLOs) come with certain risks, but Boehly noted that "CBO markets are here to stay." Pages echoed Boehly's thoughts, stating that there are "golden eggs" to be found in CBOs and CLOs.

Panelists also surveyed the roles that China and Japan will play in transforming the contours of global markets. While the performance of the world's economy used to be inextricably tied to that of the United States, Green observed that China is becoming a driver of Asia′s economy -- and a more important trading partner for Japan than the United States this year. "China has reached self-sustaining takeoff speed" in its economy, he added. Absent political turmoil and major economic problems, China's emergence presents opportunities for further investment.

"People underestimate how much Japan has turned the corner in the past couple of years," said Green in response to a query about Japan. Despite China's massive growth, Green added that the size of Osaka's regional economy is larger than that of China's. David Jackson of Istithmar agreed with Green′s assessment that Japan is a supertanker but added that supertankers are not nimble and that Japan's banks are still not competitive.

Other factors reshaping the global markets landscape are the weaker dollar and the increasing infrastructure needs of the world. As the dollar weakens, panelists noted, Russian, Chinese and other foreign firms will come knocking at America′s door to look for investments. And, they added, America should not respond to foreign investment by erecting protectionist barriers.

Jackson reported that due to years of underinvestment in Middle Eastern infrastructure, opportunities to invest in infrastructural projects in the region are tremendous. In Asia, massive environmental challenges, especially in China, present opportunities to invest in technologies that will help alleviate the deleterious effects of rapid economic growth. Investing in solutions to mitigating water pollution is also an opportunity, but there does exist the potential for governments to dampen returns.

There was wide disagreement among the panelists about where to avoid investing, but panelist′s views tended to fall in line with the exposure of their firms. Green noted that "private equity bridge" products might also be avoided.

Moderators
Maria Bartiromo, Anchor, "Closing Bell with Maria Bartiromo," Managing Editor and Anchor, "The Wall Street Journal Report," CNBC
Speakers
Todd Boehly, Managing Partner, Guggenheim Partners LLC.
Stefan Green, Managing Director, Goldman Sachs & Co.
David Jackson, CEO, Istithmar
François Pagès, CEO, Calyon Securities
7:55 am - 9:10 am
The panelists spoke about the various health issues that have plagued America for the past 50 years or so, and how studies have shown that these issues are directly linked to the American diet. They highlighted research that has proved how plant-based nutrition can reduce many of the major diseases; in fact, much of the discussed research was undertaken by the panelists themselves.

Professor T. Colin Campbell of Cornell University has done a great deal of experimental research on lab animals and observed the effects of intake of animal-based protein on tumor development. His studies indicate that by adjusting animal-based protein intake, we can turn the development of tumors on and off. In fact, his research has so far indicated that incidence rates of various cancers increase with the consumption of animal-based foods. Campbell went as far to assert that proper nutrition can prevent, suspend and/or cure other major diseases, such as heart disease, multiple sclerosis, kidney stones, cataracts and osteoporosis, just to name a few, along with promoting superior physical fitness.

So how do researchers and scientists define a proper diet? The chief components are a diet based on plants and whole grains. Out off 144 studies on this subject, all have statistically shown the positive health effects and disease prevention power of proper nutrition.

As humans, we are well adapted to fighting starvation and infections. However, the same does not hold true when we run into overnutrition and fighting infections. To help cope with this, experts agree that humans need a balance in their diet to silence abnormal genes. This balance comes from a healthy dose of Omega 3 and Omega 6 fatty foods that have been shown to act as anti-oxidants. Professor David Heber of the Center for Human Nutrition noted, "What is important to understand is that proper nutrition is not about eating less, but rather about eating better." This means we should incorporate more colorful fruits and vegetables. In fact, experts argue that the more colorful your plate, the better off you will be. As such, a recent topic in this area of research by many scientists has been the positive health effects of pomegranate fruits. Pomegranates are believed to be the "apple in the garden of Eden" and have been shown to have four times the antioxidant potency of green tea.

The FDA's original 1970s-era food pyramid is no longer the correct model to follow; a new pyramid was defined in 1997 to encourage more fruits, vegetables, whole grains and spices at the base of the pyramid. By doing so, Lewis Kuller from the University of Pittsburgh pointed out that proper diet is the only way to reduce health-care costs.

Unfortunately, many dietary improvements are coming too late. Most men and women over age 65 develop some form of coronary heart disease, the result of an over-consumption of saturated fats and too low consumption of foods with omega 3 and omega 6 persist. Excessive caloric intake and decreased energy expenditures continue to lead people toward obesity, which in turn increases chances of diabetes, various cancers, stroke and kidney disability. These trends may continue to evolve as developing countries continue to urbanize and adopt the same fast food model as the United States.

The panel agreed that understanding how many of these diseases come about and educating the public is the first step toward prevention. The food industry and advertisers must collaborate in increasing health awareness and proper nutrition in order to promote a healthy lifestyle and longevity. Sadly, many individuals believe that even with a proper diet they are doomed due to genetic predispositions. But Campbell noted that "if you are consuming the right kind of diet, you can control the mischievous genes in your body." As such, consumer education and consumer demand could drive food processors to sell healthier foods and advertisers to promote more nutritional diets. The recent successes of the water bottle companies and organic producers are clear examples that consumer education and demand will drive the industry to make healthy foods available on shelf spaces.

Moderators
Caldwell Esselstyn Jr., Preventive Medical Consultant, Department of General Surgery, Cleveland Clinic
Speakers
T. Colin Campbell, Jacob Gould Schurman Professor, College of Human Ecology, Cornell University
David Heber, Professor, Medicine and Public Health; Founding Director, Center for Human Nutrition
Lewis Kuller, Professor of Public Health, Department of Epidemiology, University of Pittsburgh
7:55 am - 9:10 am
"E-waste is the fastest-growing solid-waste treatment in the world," said John Shegerian of Electronic Recyclers, who opened the panel discussion of the confluence of consumables and green consciousness. Green is cool, green is hip, he said, but he challenged the panelists to explore whether that green vision is really creating the desired outcomes.

Ric Erdheim of Phillips Electronics, dubbed by Shegerian "Mr. e-Waste," reflected on the view from the manufacturers' side.

"Manufacturers understand that green sells," and they're moving in that direction, he said; and their move is spilling over into the policy realm. To illustrate this, he pointed to the example of incandescent bulbs.

On Dec. 6, 2006, Erdheim explained, if you'd asked any politician whether the United States should ban incandescent bulbs, you'd be laughed out of the room. On Dec. 7, the president of Phillips called for the phasing out of incandescents in favor of compact fluorescent bulbs, which are significantly more energy-efficient. Now there is legislation on the horizon to make green policies official. In California, much of this groundbreaking legislation has already been passed.

Erdheim believes, however, that these successes are not being touted enthusiastically to other states And Rubin Aronin of Global Green USA reminded that audience that while California has been a leader in the path of effecting good policy, the United States still uses a quarter of the world's resources. Nor does he see consumer demand changing.

The change that is coming is one of design,he noted; producers are thinking more about "cradle-to-cradle design," making their products easier to dismantle and recycle. With this comes the necessity of educating the public on how to choose products wisely, making recyclable purchases part of the consumer process.

Deeply involved in educating consumers and influencing the image of "green" were Benjamin Goldhirsh, publisher of Good magazine, and Becky Morgan of the UK-based Global Cool. Goldhirsh said that his generation is not interested in sacrificing their interests; in fact, he wants to see consumer demand grow, to make companies agree that "going green" is pragmatic and profitable. He suggested that rather than telling people what they should be doing to be better people, green educators should provide them with the opportunity to think for themselves. Good magazine profiles people who are being green and making a difference, he said, with the idea that the public will want to emulate them and think about ways to incorporate green strategies in their own lives. Morgan agreed, saying Global Cool is about making the shift from being green because you feel guilty to making lifestyle changes because they're cool and you want to.

Shegerian pointed to a recent poll in Iowa, in which a third of respondents felt that the biggest political issue is the environment. This is partly because they have control over it, as opposed to the lack of power they had in the response to Katrina or the Iraq war. People know they can help solve this problem through modifications in their behavior, and that being a part of moving things forward is, in the words of Goldhirsh, "part of living a valuable and relevant life."

The question remains, though, how active a role governments should take, and whether they should emphasize incentives or punishments. Erdheim emphasized that governments should take both tacks, but that they need to keep up to date on the state of the electronic world. Many lawmakers, he said, do not realize that this is a "post-environmentalism world," that the economy is not what it was 15 years ago and that the situation is changing rapidly.

Aronin added that policies California and the European Union could help drive best practices for manufacturers and others. He said that it's not rational to believe that the majority of companies will take change their behaviors independent of regulation. Morgan agreed that government response is crucial, saying it's really only in North America that the government is not taking action.

Nevertheless, all the panelists stressed that getting the public involved in demanding eco-friendly services and products is the bottom line. Morgan said it's an issue of personal empowerment. As soon as voters care, that becomes the impetus you need on the policy side. "We finally 'get' that this is a crisis," said Aronin, and the trick is to find actionable items and overcome cynicism about the potential for change. As Goldhirsh pointed out, "When the stakes are this high, being cynical moves from being acceptable to becoming absurd."

The bottom line, he said, is that environmentalism must become a critical component of "what's sweet." Whether it's turning the AC off, taking the TV off "standby," buying locally grown food, not buying imported bottled water, these are achievable shifts in personal perception and action. The only thing keeping us from the good life, he concluded, is our own inertia.

Moderators
John Shegerian, Chairman and CEO, Electronic Recyclers
Speakers
Ruben Aronin, Communications Director, Global Green
Ric Erdheim, Senior Counsel, Philips Electronics
Benjamin Goldhirsh, Owner and Founder, Reason Industries
Becky Morgan, Commercial Director, Global Cool
7:55 am - 9:10 am
Moderator Lou Lehrman of Dutko Worldwide noted the United States has invested $100 billion to date in broadband infrastructure, with another $150 billion of infrastructure investment required to achieve "universal access." Universal access is the idea that all Americans should have access to broadband data services -- similar to universal access to electricity. But beyond the issue of whether infrastructure investment can even keep up with explosive growth in content, there remains a fundamental question: Is universal access even feasible, given the prohibitive marginal cost at current technology levels for providing broadband access to those living in remote areas?

The current broadband market is dominated by telecommunications companies (telcos) and cable television (cable) providers. Laura Martin of Media Metrics led the panel in noting that cable currently has the upper hand by offering "triple play" convergence of bundling voice, data and cable television content as one carrier and through one bill. "Don't count out the telcos though," she warned. They may appear less agile, but their sheer size and market position could result in their domination of the broadband market over time. The discussion made clear that both telcos and cable providers will remain relevant well in to the foreseeable future.

The panel predicted that current broadband technology will continue to expand in U.S. cities, where the marginal costs are rather stable for providing curbside connections. The real challenge lies in rural areas, where the marginal cost of extending present technology -- normally a fiber optic cable -- far exceeds the carrier's ability to recover the investment cost. While Dan Sudnick of Trident Scientific noted that wireless options can address some wideband demands in and near cities, wireless is not a feasible option for rural areas.

Jesse Johnson of Global Communications Inc. described one potential solution in the not-too-distant future. His company has developed an approach to transmitting data over existing "twisted-pair" telephone wire that supports high-capacity data transfer. While not yet ready for deployment, the approach may drastically reduce the marginal cost of broadband service to rural users by using existing telephone lines rather than installing new fiber-optic cable. Further advances may even address the anticipated exponential growth in future demand.

Universal access will also likely require federal government involvement to spur investment. Slow implementation of broadband in China and South Korea demonstrates the limitations of government-run telcos, in part due to their lack of access to market capital. So rather than look to government for a solution through provision of services or regulating access, the panelists agreed, both consumers and firms are better off with federal policies that spur market capital investments in technology and infrastructure to lower the cost of providing broadband services to rural areas.

On the issue of net neutrality, the panel split. The definition of net neutrality is still in flux but is generally considered the regulatory and/or design regime that does not differentiate (i.e., considers neutral) by content the information packets moving over the Internet. Net neutrality generally pertains to the "triple play" of voice, data and cable content, where a net-neutral regime would treat all packets equal for pricing, despite the fact that voice and cable content possess a higher priority for traveling over the Internet. It also pertains to whether the Federal Communications Commission (FCC) considers broadband services under information services or telecommunications regulations. The ability to prioritize content and apply tiered-fee structure is the dilemma for broadband service providers who expect to incur significant infrastructure upgrade costs to support the exponential growth of high-priority voice and cable content. A net-neutral policy would not allow the service providers to differentiate pricing based on content, despite the fact their infrastructure upgrades are a direct result of differences in content. Thus, broadband service providers prefer a non-neutral policy; as Johnson pointed out, if he has to incur the infrastructure costs for providing broadband services, he should be able to differentiate pricing based on the content that is driving his infrastructure design and implementation costs.

Conversely, small content providers advocate a net-neutral policy because it enables small startup companies to compete with the large telcos and cable companies that possess inherent efficiencies of scale and provide both content and services. They fear non-neutral network pricing policies allow large telcos and cable companies to price out their smaller competitors and create architectural obstacles to new content -- especially when the new content competes with their existing or planned business operations. They also note that a non-neutral network would come at the expense of consumers by eliminating the economic incentives to create new content products that consumers will eventually desire.

The last issue was copyright and content management to monetize reproducible content. The upcoming 2008 Olympics were cited as an example: more than 100 web sites already exist in China that will rebroadcast NBC's coverage of the Olympic Games without compensating the network, despite NBC's exclusive right to Olympic broadcast content. Consistent with other sessions, this panel generally concluded that NBC will be unsuccessful in completely stopping the rebroadcast over the Internet and that the challenge is to differentiate content based on quality and to generate advertising revenue based on the re-broadcasting of NBC's original broadcast.

The panel closed with reiterating that it is not yet feasible to fund the infrastructure for universal access at current technology levels and that the federal government would create an unintended disincentive for market capital to invest in new technology by choosing to regulate universal access. Panel members also agreed that net neutrality is a long way from being resolved and that it is too early to forecast the outcome.

Moderators
Lou Lehrman, Vice President, Dutko Worldwide
Speakers
J.A. Johnson, Chairman, Global Communications Inc.
Laura Martin, Founder and CEO, Media Metrics
Dan Sudnick, Chairman and CEO, Trident Scientific
Michelle Wu, CEO, MediaZone
7:55 am - 9:10 am
This private meeting, hosted by FasterCures / The Center for Accelerating Medical Solutions, will lay out the vision and benefits of its newest initiative -- the FasterCures Philanthropy Advisory Service, which is funded by the Bill and Melinda Gates Foundation and the Robert Wood Johnson Foundation. This program seeks to reinvent medical philanthropy for the 21st century. The project will identify and characterize opportunities to support non-profit medical research and provide that information to philanthropists and their financial advisors.

This session is by "invitation only" and is limited to invited guests. If you are interested in attending, please send an e-mail request to jmeehan@milkeninstitute.org.

7:55 am - 9:10 am
Moderator and SAVE executive director Joel Kurtzman set the theme of this session, the lessening of U.S. dependence on oil and an examination of the environmental issues associated with oil.

SAVE, he explained, was launched by Michael Milken in 2006 as a result of the Institute's first Financial Innovations Lab, which sought to address the issue of energy independence in the transportation sector. This first SAVE project was a collaborative effort of experts in finance, energy, research, infrastructure and the environment. One of SAVE's goals is to design mechanisms to provide capital to those who provide inventive technologies.

Kurtzman simplified the oil issue to one of addressing the spread in the price of oil versus the cost of oil. Eliminating all subsidies and adding all the externalities, he said, the price of oil should be around $10 per gallon, of which 30 cents comes from environmental costs. This cost, which amounts to $34 billion per year, should be invested in alternate energy.

Kurtzman credited Richard Sandor, chairman of the Chicago Climate Exchange, for developing financial tools to solve the CO2 emissions and acid rain problems in the 1970s and 1980s. Sandor agreed that we should monetize the spread. Air and water, he said, are no longer free. The use of oil, he added, gives rise to one positive output (energy) and more negatively priced goods: greenhouse gases (CO2, NOx, SOx, Hg); particulates, etc., which have adverse health effects; and global warming.

Sandor posed several questions: How do you price such a commodity so that everyone optimizes and uses it? How do you invent a secondary good, such as "the right to emit," which can be traded? Coal and oil are not necessarily bad, he noted. Prices of energy from these sources after abatement are between $20-30 per megawatt hour versus $50 per megawatt hour for natural gas. His goal is to redirect the attention from "ugly" or "costly" fuels and to focus and capture instead their externalities, thereby creating maximum positive environmental and social benefits.

G. Chris Andersen, co-chairman of SAVE, echoed Sandor's remarks and suggested that we pay attention to those with experience in alternative fuel solutions and tap into their expertise. Business leaders and policy makers should look at what the world badly needs, he said, and find creative ways to finance and mobilize capital.

Richard Hamilton of Ceres focused his attention to biofuels, specifically the feedstock for biofuels. He pointed to the run-up in corn prices that resulted from diverting corn to ethanol production. Corn is not sustainable as a feedstock for ethanol, he stated, and we should be using biotechnology to refine cellulose. He shared a quote from Steven E. Koonin, chief scientist of British Petroleum, "It's the cellulose, stupid." Using such biomass as grass miscanthus, he said, a 10-year contract on 100 million acres could yield 20.9 billion barrels of oil, an amount equivalent to the proven reserves of Exxon Mobil.

Bob Kelley of DKRW Energy LLC, a firm in the business of converting coal to liquids, explained that there is enormous opportunity in clean coal. Rather than address the effluents, his firm addresses stripping the greenhouse gases (GHG) and mercury in the raw materials before they are processed. Andersen concurred that this coal-to-liquid process is competitive. And Kurtzman added that externalities, such as polluted ports and energy spent on transporting fuel from the Middle East, should also be priced in when making comparisons. He brought up a PowerPoint slide showing that GHG emissions from fuel derived from coal-to-liquid after sequestering were better than GHG from petroleum.

Arnold Leitner of Skyfuel explained that solar power is competitive to coal when one takes into account the cost of carbon sequestration. He emphasized that the source of solar power is infinite, and that wind and hydro are derivatives of solar energy. An acre of soybeans may yield 60 gallons of clean-burning biodiesel, but solar installed on the same acre yields 500 times more fuel, the equivalent to 30,000 gallons per acre, he said.

Storing energy in the form of heat can solve the storage problem, said Lietner. Parabolic concentrators are well suited for generating heat, which can be used to produce steam, which in turn can be used to produce electricity. Advancements in concentrator technology include the use of lenses to focus the light, parallel mirrors that track the sun and concentrate the energy and other power management processes.

Joe Pettis of Safeway said that his company's headquarters are now powered wholly by renewable energy (100 percent wind) and that Safeway was recently awarded a utility license to tap into alternative technologies, such as concentrators, to produce energy.

Richard Pietrafesa Jr. of Destiny USA talked about his firm's project in upstate New York. Destiny, he said, can transform the ecosystem of an environmentally challenged community into a sustainable 100 percent climate-positive green community by using taxes as sources of capital. The company's success in converting a brownfield to a greenfield should be a testament for others, he added.

Dan Weiss of Angeleno Group addressed the role of investors in bringing alternative energy to the mainstream. Only a small fraction of more than $3.5 trillion of investable capital went into clean technology last year, he said, though he expects tremendous opportunities in this area as capital flow increases.

Moderators
Joel Kurtzman, Senior Fellow, Milken Institute; Executive Director, SAVE; Senior Advisor, Knowledge Universe
Speakers
G. Chris Andersen, Founder and Partner, G.C. Andersen Partners LLC
Richard Hamilton, CEO, Ceres Inc.
Robert Kelly, Founding Partner, DKRW Energy LLC
Arnold Leitner, CEO and President, SkyFuel Inc.
Joseph Pettus, Senior Vice President, Fuel and Energy, Safeway Inc.
Richard Pietrafesa Jr., Managing Director, Destiny USA
Richard Sandor, Chairman and CEO, Chicago Climate Exchange Inc.; Senior Fellow, Milken Institute
Daniel Weiss, Co-Founder and Managing Partner, Angeleno Group (AG)
9:20 am - 10:35 am
Normally, putting moderator William Samuels of the Blue Tiger Democrats and pollster Frank Luntz in the same room is throwing gasoline on the fire. But perhaps the most lively debate at Global Conference 2007 produced a surprising amount of consensus around the lack of clear front-runner in either party and what traits Americans are looking for in the next president. So expect a bumpy road, with unforeseeable twists and the potential for next February's primaries not to deliver the decisive candidate of either party, despite conventional wisdom.

"There's never been more idealism than in America today," said Samuels. "It is as high as when I was a kid in 1968." His introductory comments opened the discussion with infectious enthusiasm about increased American voter involvement, despite waning party affiliation. Only two generations ago, he said, professional politicians selected a party's candidate. "Now over 60 percent of convention delegates are not primarily professional politicians." Likewise, voters increasingly prefer to be seen as independent rather than affiliated with either party.>p> This shift away from party affiliation may appear at odds with the money still pouring in to party coffers, but Kenneth Mehlman, former chair of the RNC, sees the money in line with present-day business costs: "We spend more on Easter candy than we do on the presidential election," he said. But Deborah Rappaport disagreed, stating that campaign season 2008 "is going to be a billion-dollar year" that will "represent either the pinnacle or nadir of money and the primary process."

While the audience grappled with her point, she moved rapidly to note that decreasing major party affiliation can be traced to population changes in association with advances in communications, like the Internet. The growing cohort of voters is aligned more by interest than major party affiliation. "Demographics are changing the political scene," she warned, "and the politicians should pay close attention to this." The 'millennium generation' will make up 25 percent of the voting public within the next 10 years, she explained, and is accustomed to the Internet and tailored content that meets their interests and preferences. Set in that context, it should come as no surprise that "this generation's number one source of news is John Stewart or Stephen Colbert." Mehlman echoed this. "The rise of new media is good, he said. "The onus is on the incumbent political parties to use [effectively]."

The firestorm erupted on whether this information-rich environment elevates the importance of branding. An enflamed Luntz lit up, "I have a real issue with the whole concept of branding, in terms of politics. We are not selling furniture. This is about issues, principles -- this is about the future!" Rappaport found middle ground with, "You do not sell a politician the way you sell a car or water or a book, but you at least have to be cognizant of what branding means. We need to bring in new voters for democracy to survive. This is the most marketed-to generation ever ... and they are all turning 18 starting next year."

Mehlman seized the opportunity to quench the fire by noting, "There's always been skepticism about politicians -- it's in (Americans') DNA. Some of it is earned by politicians′ own actions, but it is also a reflection of our independence as individuals. The first thing we do when someone says he wants to represent us is to ask ourselves, 'Why is this person qualified to lead me?'

"The fact is," he continued, "both parties are at a crossroads -- an 'idea crossroads.' The raison d'etre for both parties over the last 35 years has been accomplished -- the USSR is gone, welfare is reformed, crime is down. Was it messy? Yeah. Were some (politicians)crooked? Yeah. But because everybody got involved, the system is still thriving and we should be proud." Riding on that success, he added, it′s no surprise that "the American people are asking, 'What's next?' There is a need to speak on the problems of today and the future." He listed the top issues as the war on terror, health care, education and energy independence. The panel nodded their heads in consensus.

Similar agreement appeared on the adverse consequences of expanded media outlets, the February primaries and the demands of campaign fund-raising. Technology like the Internet enables lightly funded candidates to compete, yet all the activity has a cost. The race is on at warp speed, and Luntz sees a downside. "The candidates are so occupied in day-to-day campaign demands, they have no time to think --to actually spend time contemplating America's issues and maturing solutions. Instead, their day is racing from one event to another." Gray Davis echoed this: "Politics changes with each day," he stated, "I've never seen more demands on the candidates."

Returning to the 2008 election, Samuel asked, "So what are Americans looking for in the next president?" Luntz offered a succinct reply: "America wants a candidate who says what he means and means what he says. Americans are tired of talk in Washington -- they want someone who gets things done and is a leader in times of crisis. The candidate that can capture the image of putting the man on the moon and getting him back again will be elected."

Davis expanding on this theme. "Anyone who wants to run for political office," he said, "has to ask himself two questions. One, what does America need now? And two, why am I the best person to get this job?" During the Cold War, he added, the president had always been a military person. After the Cold War, there was an opportunity for someone without military experience. But September 11 was a singular even that changed who America wants for president. "The elephant is in the room," he said, "because America wants some to keep them safe. Health care and the environment will both be in the room, but the next president has to keep us safe."

Meanwhile, health care, immigration and the environment will lead the slate of domestic issues that flesh out a candidate and appeal to various independents on both sides of the issue, the panelists agreed.

Taking the discussion to a more personal level, Samuels asked panelists, "What drives you crazy about the other party?"

"The Republicans' sense of moral superiority," said Davis. "We elect them to solve our problems; not lecture us on how to live." Mehlman responded, "Both parties make the mistake of personalizing issues. Politics ought to be an honorable debate, though we disagree on how to get there." The panel recounted past examples where both sides' honor fell short, starting 138 years ago with the Republican cartoonist Thomas Nash's depiction of the Democratic Party machinery as a jackass.

A serious tone returned as Samuels directed the panel back to the 2008 election: Who is going to win in primaries in 2008? The general consensus was it is simply too early to know. Because campaign dynamics can change with each news cycle, some significant event will happen in the next year that will define or fundamentally alter the race, panelists agreed. Rappaport noted, "Whatever that event is perhaps cannot be anticipated, probably will not be recognized while it is occurring and perhaps not even recognized until days or weeks after the event." This alone makes it difficult to forecast this far out.

Mehlman reinforced the notion that on the Republican side, "there is no front-runner -- (Mitt) Romney has the money advantage, (John) McCain has the party advantage, and (Rudy) Guliani has the numbers right now."

Luntz added, "Of the Democrats, (John) Edwards is the most engaging, Barack (Obama) is a 'uniter' with ability to bring people together." Mrs. Clinton has Bill, he continued. Add in potential undeclared wild cards like Fred Thompson and Al Gore, and there is no clear front-runner right now going into February's primaries.

Luntz did have advice for Edwards though: to stand at every speaking event because "when he stands, he is the best of any politician up there, but when he is sitting, he is a completely different person" who is fidgety and forgoes his advantage.

"We need candidates," he continued, "who will say, 'I am not perfect, but I do not make the same mistake twice,′ that 'I am not a Democrat first or Republican first, but an American first, and these are American issues.'"

While Davis said he was sure a candidate would be chosen in February, Mehlman remained unconvinced, pointing out that several of the primaries split delegates according to the popular vote; if you have three different candidates winning the first three primaries, it could be a long, hard road to the conventions. Davis suggested that the difference may be California's primary, where absentee voting commences 30 days before the election. Rappaport agreed that both the importance of California absentee voting and the Democratic Party will have settled on a candidate in February.

Summing up the discussion, Samuels highlighted the enthusiasm in politics today and the array of good candidates that will make this one of the most interesting presidential elections in decades. Noting that it will indeed be a bumpy ride for both the candidates and the parties, the panel and audience departed will a wealth of issues to discuss over lunch.

NOTE: Panelist Joe Trippi was unable to attend this panel.

Moderators
William Samuels, Founder and Chairman, Blue Tiger Democrats
Speakers
Gray Davis, Former Governor, State of California; Counsel, Loeb & Loeb LLP
Frank Luntz, Founder and CEO, Luntz, Maslansky Strategic Research
Kenneth Mehlman, Partner, Akin Gump Strauss Hauer & Feld LLP; former Chairman, Republican National Committee
Deborah Rappaport, Founder and CEO, Skyline Public Works
9:20 am - 10:35 am
The Arab world is a complex group of culturally, politically and economically diverse nations that at once offers tremendous opportunity for growth, but also varying degrees of risk. Nabil Fahmy, the Egyptian Ambassador to the United States, noted that while it is easy for him to represent Egypt in the United States -- after all, chapters on Egypt appear in every grade-school history text -- the greater challenge is to provide a context for the multifaceted nature of the Arab world.

That world stretches from Morocco to Syria, and from Iraq south to the Gulf States. While the nations share an important cultural component (Arabic language), each also has its own national experience and identity. For example, he said, Morocco has a relationship with West Africa and Europe, yet things are very different at the eastern edge of the Middle East.

Although Arab world is ancient culturally, in character it is actually quite young, with more than half its population under 25. Young people are looking to the future, said the ambassador, and facing the challenge of being part of a global community. Arab countries must engage the international community and embrace economic openness, he added, if they are to achieve the growth necessary to fill the rapidly rising need for nearly 100 million new jobs by 2020.

Ambassador Ali Aujali, Chief of the Libyan Liaison Office, agreed, stressing the importance of business relationships with the West. Libya and the West have had no relations for the past 50 years, and only recently did Libya take the first step toward renewing contact with the United States. Chief among the connections being rebuilt are business and education. "We must rebuild this bridge," said Aujali of education, pointing out that allowing Libyans to study in America would enhance cultural understanding in both regions. He said that Libya wants good relations with the United States but wants those relations to be based on education, business and, most important, respect.

Moderator Steven Green, former U.S. Ambassador to the Republic of Singapore and Managing Director of Greenstreet Partners, asked the ambassadors to touch upon the issues of terrorism and the Israel/Palestine dilemma. Fahmy likened Americans' understanding of fundamentalist terrorism to "trying to watch TV on a distorted screen," saying the U.S. public generally doesn't see the whole picture and tends to forget that before terrorists attacked America, they were attacking Arab targets.

"Invasion and military action will never help us to save the world and prevent terrorism," said Aujali. He expressed a desire for diplomacy and understanding, and said that he thought one of the most important sources of conflict in the Middle East was the Israel/Palestine dilemma. He encouraged the United States to confront the problem of injustice in the region.

Fahmy added that the average Arab is neither anti-American nor a terrorist, but is frustrated with U.S. policy in the region. He also noted that the only answer to the question of Israel and Palestine was a two-state solution with two capitals. Fahmy expressed hope that this is possible in the near term because "both sides need it."

Both Fahmy and Aujali encouraged the United States to move forward and continue to draft peace proposals that will give Israel and Palestine fewer excuses for inaction. Additionally, the U.S. must engage parties as a friend, not as a challenger. If this situation can be cleared up, there will be huge dividends for Arab relations with the West. "I hope," said Aujali, "we will see peace in my lifetime in the Middle East."

Moderators
Steven Green, Former U.S. Ambassador to the Republic of Singapore; Managing Director, Greenstreet Partners
Speakers
Ali Aujali, Ambassador, Chief of the Libyan Liaison Office, Washington, D.C.
Nabil Fahmy, Ambassador, Arab Republic of Egypt to the United States
9:20 am - 10:35 am
Most of the securities issued in public offerings today did not exist before 1974. The spectrum of capital structure, from debt to equity, has merged in recent years with the explosion of financial innovations and products. These innovations have had a profound influence on the world economy - and important consequences for the management of risk for societies and political systems. Understanding how these complex capital structures affect the way companies and individuals can raise capital in larger amounts and at lower cost is critical to overcoming growth challenges throughout the world. There is still a striking lack of diversification and a huge amount of un-hedged risks in the world. In past sessions, our panelists have warned against "running victory laps prematurely" in celebrating the financial revolution of the last quarter of the 20th century. This year's panelists will answer the question: Is the great wave of financial innovation subsiding in the 21st century at a time when it is needed most? What are the sources and content of financial innovation now and for the coming year?
Moderators
Glenn Yago, Director, Capital Studies, Milken Institute
Speakers
Richard d'Albert, Managing Director and Global Head of Securitized Products Group & CDO Group, Deutsche Bank
Michael Milken, Chairman, Milken Institute; Chairman, FasterCures / The Center for Accelerating Medical Solutions
Lewis Ranieri, Founder, Hyperion Private Equity Funds; Chairman, CEO and President, Ranieri & Co. Inc.
Richard Sandor, Chairman and CEO, Chicago Climate Exchange Inc.; Senior Fellow, Milken Institute
9:20 am - 10:35 am
The average number of household devices has risen from just 1.3 in 1975 to 26 in 2007, an astounding increase, and there are many signs that intelligent, personalized devices hold even greater potential in the coming years. "Technology drives new markets," said moderator Kevin Klowden, introducing the panel of technology and business leaders gathered to discuss "the next cool thing" that will shake up our markets.

Todd Thibodeaux of Consumer Electronics Organization explained that most of the $3,500 that households pay each year on consumer products is actually money paid for services, and said that he sees innovative services as a good value proposition for consumers in the future.

Michael Warner of Quantum4D predicted that virtual reality-based applications will drive the innovation of tomorrow. These applications can range from games to business data visualization. And Shane Wall of Intel said that while it is hard to imagine all the applications that lie ahead, they will likely to be very personalized experiences driven by ubiquitous computing devices.

Silviu Moraru of Sumsung credited increased capacity of mobile devices as the main technology enabler for new services and applications. For instance, he explained, the fourth-generation (4G) wireless standard download speeds of 100Mbps (expected to debut around 2010) will dwarf the current 384 kbps 3G speeds available today. Intel is preparing for the ubiquitous computing future by developing chips and sensors at much smaller size and order of magnitude with UltraMobile PC technology.

Richard Stromback of Ecology Coatings reminded the panelists that in order to make these devices viable, they must be manufactured in cost-efficient and environmentally friendly ways. His company, he added, has recently invented a clean process for efficient and eco-friendly coating of many heterogeneous devices.

Asked about the challenges these changes are likely to bring for both consumers and innovators. Thibodeaux stressed that usability is becoming a major barrier to adoption of products, especially high-tech solutions. If you ask the consumer to define the next cool thing, you′d probably hear simply, "something that works." Too many gadgets flooding the market today are a result of "product splat -- throwing products at the wall and seeing what sticks," he said. Instead Thibodeaux recommended spending time and resources to help users integrate new products into their existing environments, such as providing integrated store displays, installation services and easy access to maintenance. Successful products, he added, are breakthrough in a clearly defined area, but complementary to products you already own.

As the number of devices expected to work together increases, interoperability becomes more important. Incompatible standards have been a major source of frustration to consumers. However, as Wall pointed out, proprietary standards provide vendors with competitive advantages without which they cannot gain enough market share to make money on R&D investments. Thibodeaux added that often technology leaders disagree about what the standard should be. Time is required to come to an agreement, but the market often does not want to wait; as a result, competing vendors adopt different open standards.

All the panelists agreed that digital rights management (DRM), as implemented today, is a major barrier to usability, interoperability and ultimately the adoption of innovative technologies. Wall noted that DRM is a "temporary phenomenon," necessary for studios to "get over their fears" of how to sell products. Now, as Apple has clearly demonstrated, consumers will buy music online if it is a simple process, even if there is still a way to download it illegally elsewhere. Moraru agreed that DRM is doing more harm than good. Among handhelds with WIFI capacity download songs, only 1 percent of consumers actually download songs. The major reason cited by consumers is that they feel restricted that the music they pay for can only be played on the phone and they want to control the content and be able to transfer it among all their digital devices.

Moderators
Kevin Klowden, Managing Economist, Milken Institute
Speakers
Silviu Moraru, Manager of Technology and Competitive Intelligence, Wireless Terminals Division, Samsung Telecommunications, America
Richard Stromback, CEO, Ecology Coatings
Todd Thibodeaux, Senior Vice President, Industry Relations, Consumer Electronics Association
Shane Wall, Vice President, Mobility Group; Director, Ultra Mobility Business Planning, Architecture and Software, Intel Corporation
Michael Warner, CEO, Quantum4D
9:20 am - 10:35 am
A story in The Wall Street Journal recently asked, "Why isn't Philadelphia Boston?" In other words, how do two cities with such similar history and geography end up so different -- one a thriving high-tech powerhouse and the other a struggling urban center? What do Singapore, London and Shanghai -- all successful 21st century economies -- have that other regions don't? Why is Florida putting so much money into building up its life sciences while Nevada bets on growth? What's the answer to creating vibrant regional economies? Is it having leading research universities? Technology clusters? A vibrant cultural life that draws creative workers to an area? What are successful regions doing that might be replicated elsewhere?
Moderators
Ross DeVol, Executive Director, Economic Research, Milken Institute
Speakers
Edward Holmes, Executive Deputy Chairman for Translational and Clinical Sciences, Biomedical Research Council; Chairman, National Medical Research Council (Singapore)
Robert McMahan, Senior Advisor to the Governor for Science and Technology, North Carolina; Executive Director, North Carolina Board of Science and Technology
Laura Miller, Mayor, Dallas, Texas
Heather Munroe-Blum, Principal, Vice-Chancellor, and Professor of Medicine, McGill University
9:20 am - 10:35 am
It's all about YOU: genomes, biomarkers, bio-specimens and genetic markers. These words are constantly emerging in stories related to our health and medical research. What do they mean? Why should we care? This panel, featuring leading experts in the field of personalized medicine, will tackle these questions, describe the vast potential of this new area to improve diagnosis and treatment of disease -- by providing individualized treatment based on a person's specific makeup -- and address the potential barriers to moving forward in this new area of research.
Moderators
Greg Simon, President, FasterCures / The Center for Accelerating Medical Solutions
Speakers
David Agus, Director, Spielberg Family Center for Applied Proteomics; Research Director, Louis Warschaw Prostate Cancer Center, Cedars-Sinai Medical Center
Ryan Phelan, Founder and CEO, DNA Direct Inc.
Randy Scott, Co-Founder, Chairman and CEO, Genomic Health Inc.
9:20 am - 10:35 am
According to the United Nations, more than 282 million people on the planet live in diaspora communities. Remittances are now the largest form of capital flows into some countries -- surpassing foreign aid, portfolio investment and foreign direct investment. Diaspora Investing.

Jose de Jesus Legaspi of The Legaspi Company started the panel discussion by saying that diaspora investing contributes to growth of human capital and foreign direct investment. His work is mostly with Mexico, where U.S. remittances of $23 billion overtook oil income in 2006.

The Armenian experience has been just as remarkable, said Al Eisaian of Integrien Corporation, adding that Armenia has benefited from diaspora investing in the technology sector especially; a reported US$10 billion of diaspora support has gone to Armenia since its independence in 1991. The percentage of Armenia's national treasury coming from remittances stands at 10 percent.

Moving onto other subjects, Frederic Brenner of the World Economic Forum intervened to illustrate the human aspect of diasporas. The diaspora is more than mere numbers, but also identities, people, acculturation, and deep fear. "I see diaspora as a true method of fertilizing, of cross-fertilizing," he said., augmenting the point with slides taken in 45 countries where he documented how Jewish diaspora groups live and work.

In Pakistan, said Umair Khan of Folio3, he has found that entrepreneurial investments coming from diasporas are far more impactful than donations. He also added that another important activity associated to diaspora groups is how they serve as "ambassadors" for their countries of origin by showing the true face of their nations internationally.

Dunson Cheng of Cathay Bank explained that as of 2005, China had received an estimate of US$622 billion diaspora investing (coming mainly from Hong Kong, Taiwan and Singapore). For China and other countries, he said, an important factor is that diaspora groups are returning to their home countries. This phenomenon grew in Taiwan in the 1980s and 1990s, and brought the human capital that fueled to a great extent the growth of the semiconductor and computer industries there. The preceding is so important, said Morse, that the Chinese government believes that the country′s growth will hinge on educated Chinese diaspora returning.

Diaspora investors have a better knowledge than most other investors of the risks of investing in their home countries, said Kahn, adding that American investors are wise to partner with diaspora members who will help them to understand and navigate the landscape of the targeted countries.

Moderators
Kenneth Morse, Senior Lecturer and Managing Director, MIT Entrepreneurship Center
Speakers
Frederic Brenner, Davos Fellow, World Economic Forum
Dunson Cheng, Chairman and President, Cathay Bank
Al Eisaian, Chairman, Co-Founder, President and CEO, Integrien Corporation
Umair Khan, Chairman, Folio3
José de Jesús Legaspi, Owner and President, The Legaspi Company
9:20 am - 10:35 am
Global companies need the best global executive talent in order to compete. But once they recruit the best executives and future leaders, how can they be sure they will continue to be the best? Systems can be upgraded and software can be enhanced, but high-level human capital requires continuous attention, from training to coaching to team-building to leadership development to succession planning. In short, how can a company's smartest people be made smarter? And how can its global teams be made more effective? What can world-class companies do to assure they are led by world-class teams for decades to come? This panel will explore the high-level human capital needs of companies and shed new light on best practices.
Moderators
Laura Barker Morse, Human Capital Partner, Atlas Venture
Speakers
Kevin Bonfield, Vice President, Business Workforce and Capacity Management, EDS
Kwan Chee Wei, Regional Director, Human Capital Group (Asia Pacific), Watson Wyatt Worldwide
Jeffrey Cohn, Founder and Managing Partner, Bench Strength Advisors LLC
Robin Ferracone, Former President, Human Capital, Mercer Human Resources Consulting
9:20 am - 10:35 am
This session is limited to invited guests. If you are interested in attending, please send an e-mail request to jmeehan@milkeninstitute.org.
Speakers
Feng Xiao, Founder, Bosera Asset Management Co., Ltd.
9:20 am - 10:35 am
The International Energy Agency estimates that it will cost $16 trillion to build sufficient infrastructure to supply the world's energy needs between now and 2030, about $533 billion a year. In four other sectors - electric power, water, transportation and telecom - annual infrastructure estimates range from $434 billion to $610 billion a year. That's somewhere between $124 billion and $300 billion below what is expected to be available. Where will the money come from? A potential new investment security - the Global Development Bond - would marry private capital with public agency and philanthropic credit enhancement. This innovative product would apply proven financial technologies to a new market, enabling institutional investors to support significant sustainable development in emerging markets and earn an attractive return on their money.
Moderators
John Simon, Executive Vice President, Overseas Private Investment Corporation
Speakers
Reid Detchon, Executive Director, Energy and Climate, U.N. Foundation; Executive Director, Energy Future Coalition
Michael Eckhart, President, American Council on Renewable Energy
Michael Lucente, Managing Director, Head of Structured Finance, Emerging Markets, Merrill Lynch
10:45 am - 12:00 pm
Every 20 to 30 years, the global media marketplace is shaken by dramatic shifts in technology. Hollywood has weathered the upheavals caused by sound, television, the VCR and cable TV. However, unlike the past, this period of change simply refuses to go away. Just when the DVD appeared to be the key to profitability, sales started to stagnate. Cable and satellite TV continues to fragment into hundreds of channels. Movie production, finance and distribution continue to shift overseas where India has long made more movies than the U.S. and China buys more computers. And the Internet continues to provide new challenges and alternatives almost daily. What are the keys to providing stability and growth in this new era? Does the power still lie with the content providers or has it shifted to the distributors? Will our future television and movies be coming from China, India or Latin America? This panel of industry leaders will explain how and why America can remain the key player in the years to come.
Moderators
Dennis Kneale, Managing Editor, Forbes
Speakers
Peter Chernin, President and Chief Operating Officer, News Corporation; Chairman and CEO, Fox Group
Michael Lynton, Chairman and CEO, Sony Pictures Entertainment
Jonathan Miller, former Chairman and CEO, AOL
Terry Semel, Chairman and CEO, Yahoo! Inc.
10:45 am - 12:00 pm
With market fundamentals on the upswing and the world's largest private-equity buyout now completed, will more private equity find its way into real estate markets? Are these deals likely to be quick flips back into the public markets or are there sound reasons to stay private? There is a great deal of liquidity sloshing around looking for an investment. While the residential markets are correcting, most nonresidential markets seem solid. Travel and tourism, and most importantly, the foreign market, are back to pre-9/11 levels, which has boosted valuations. The commercial sector is seeing high absorption rates and vacancy rates fall. But will a herd investment mentality encouraged by investment banking deal-flow result in another property-market bubble? Or, will sound prospective returns warrant more deals?
Moderators
Lewis Feldman, Partner, Los Angeles office, Goodwin Procter LLP
Speakers
Steven Kantor, Managing Director, Head of Leveraged Finance, Real Estate and Private Placements, Credit Suisse
Mark Karlan, Executive Managing Director, CB Richard Ellis Investors
Thomas Shapiro, Founder and President, GoldenTree InSite Partners
Barry Sternlicht, Chairman and CEO, Starwood Capital Group
10:45 am - 12:00 pm
One of the most significant developments in environmental policy is the emergence of flexible, market-based instruments that permit sources to meet abatement goals at minimum cost. A key feature of the approach is the marketable allowance, which creates a market in rights to emit pollutants - and in the process creates incentives to use the most efficient controls. The most successful case of emissions rights trading is the acid rain program, wherein sulfur dioxide is capped and traded among polluting entities. This model is currently being applied in combating climate change. The Kyoto Protocol, which allows a carbon cap-and-trade program as one of its flexible mechanisms for compliance, has brought about different trading schemes here and abroad. In Europe, for example, more than 1 billion tons of carbon dioxide was traded at a value of more than 18 billion euros ($23 billion) in 2006 alone. This roundtable discussion will look at the future of carbon trading. How much will it be worth? Where are the new markets? How long is it going to last? Who will be the major players?
Moderators
Richard Sandor, Chairman and CEO, Chicago Climate Exchange Inc.; Senior Fellow, Milken Institute
Speakers
Bruce Braine, Vice President for Strategic Policy Analysis, American Electric Power Service
Daniel Braun, Director of Global Environmental Finance, Stark Investments
Neil Eckert, Chief Executive of Climate Exchange Plc.
Joseph Pettus, Senior Vice President, Fuel and Energy, Safeway Inc.
10:45 am - 12:00 pm
The combined economies of China and India -- "Chindia" --have tripled over the past decade. Chindia's emergence is perhaps one of the most consequential developments to the future of the global economic and political landscape, inspiring both wariness and delight among various constituencies. What are the major features of what moderator Jonathan Slone, CLSA, called the "defining shift in the global economy"? This panel assessed the Chindia phenomenon, its features and determinants, and consequences.

Contemporary observers may note that the Chindia economic phenomenon is unprecedented, but Robyn Meredith of Forbes noted that this is nothing new. Around 1600, the combined economies of India and China constituted 50 percent of the global economy. That said, the re-emergence of the Chinese and Indian economies is "one of these shifts we only see every couple of centuries," she added.

Chindia is becoming a price-setter of numerous commodities, is the price-setter of auto parts and books, and plays a significant role in the plastics market as well.

Antoine van Agtmael of Emerging Markets Management stressed the significance of Chindia's rise by noting that "the developed world is no longer the center of the economic universe." However, this is not necessarily bad, as the world is not a zero-sum game. In fact, van Agtmael added, a globalized world is even less of a zero-sum game.

Chindia′s rise also accounts for one of the largest elevations of entire social classes in history. While more than 200 million people lived on less than a dollar a day in the 1990s, the same number now earn more than a dollar per day. Meredith noted that poverty alleviation on such a large scale has exceeded any social or public-policy program to date.

How should the West engage these new economies? Frank Sixt of Hutchison Whampoa felt that instead of focusing narrowly on trade balances, currency exchange rates and other 20th century variables, we should consider 21st century constraints. Fairness in trade, resource allocation and energy matters should be taken into account, as well, when evaluating the basis for engaging Chindia.

While it is convenient to lump China and India into one economic category, some panelists noted that "Chindia" is a misnomer because of the stark differences between the two countries, and the fact that the Chindia phenomenon also involves other countries. While India has relied on markets to grow its economy, China has relied on policy direction from the central government, noted Sixt. Meredith also stressed the differences between China and India through analogy. While she sees China as a dragon -- fear-inspiring, fire-breathing, but weaker than it looks -- she likens India to an elephant --trudging slowly, with lots of momentum but no surprises.

The differences in Chinese and Indian economies are also reflected in the quality of their private companies. While India has several strong, world-class corporations, Meredith said, there are very few strong Chinese companies. Van Agtmael disagreed with the spirit of Meredith′s assessment, noting that China has a competitive edge in manufacturing.

What are the threats to continued economic growth in China and India? All panelists agreed that environmental challenges are the most immediate and serious problems that could turn what van Agtmael dubbed a "prosperity train ride into a train wreck." In China, almost 40 percent of the rivers are so polluted that they cannot even be used for industrial purposes. While it is reassuring that the Chinese leadership recognized in March 2007 that China was unable to meet the targets it set for environmental standards, the risk of failure in the battle against pollution is higher in China than in India because of the sole reliance on central government control. Van Agtmael stressed the need for daring and innovative propositions to improve energy efficiency and pollution mitigation technologies.

As for political threats to continued economic growth in Chindia, panelists expressed varying degrees of concern about the possibility of conflict over Taiwan. Increasing degrees of militarization in both Beijing and New Delhi are also of concern and should merit further attention and study.

Moderators
Jonathan Slone, Head of Global Broking Operations, CLSA Ltd.
Speakers
Matthew Hart, President and Chief Operating Officer, Hilton Hotels Corporation
Robyn Meredith, Senior Editor, Asia, Forbes
Frank Sixt, Executive Director, Group Finance Director, Hutchison Whampoa Ltd.
Antoine van Agtmael, Founder, Chairman and Chief Investment Officer, Emerging Markets Management LLC
10:45 am - 12:00 pm
Egypt is the most-populous nation in the Middle East and has one of the region's largest economies. Egypt's capital markets have matured over the past 30 years, and the Cairo and Alexandria Stock Exchange (CASE) has been among the best-performing markets in the region over the past several years. Increasing foreign investment and the return of Egyptian nationals to work and invest are just two reasons for this growth. This panel will discuss investment opportunities in Egyptian capital markets.
Moderators
Nabil Fahmy, Ambassador, Arab Republic of Egypt to the United States
Speakers
Mahmoud Mohieldin, Minister of Investment, the Arab Republic of Egypt
Aladdin Saba, Chairman and Founder, Beltone Financial
Hani Sarie-El Din, Chairman, Capital Market Authority, Egypt
Mohamed Taymour, Chairman, Egyptian Capital Market Association
10:45 am - 12:00 pm
Drug development is not just for the big pharmaceutical companies any more. Some of the most innovative work in drug development is being done where you least expect it - nonprofit disease research groups. Often spending as much as a small biotech startup, these organizations are creating innovative research collaborations with industry, new methods of sharing data and using a business-model approach to accelerate new breakthroughs in disease research. This panel will profile some of the organizations leading this trend and highlight the benefits of these new industry/non-profit collaborations.
Moderators
Deborah Brooks, President and Co-Founder, Michael J. Fox Foundation for Parkinson's Research
Speakers
Russell Bromley, Chief Operating Officer, Myelin Repair Foundation
Kathy Giusti, President and CEO, Multiple Myeloma Research Foundation
James Greenwood, President and CEO, Biotechnology Industry Organization
James Heywood, CEO and d'Arbeloff Founding Director, ALS Therapy Development Foundation
10:45 am - 12:00 pm
American manufacturers have laid off millions of workers in recent years, yet paradoxically complain of vast skill shortages as globalization and technology change drive the upskilling of jobs in every industry. CEOs who once projected that China and India would be the "brawn" while the US would be the "brains" are now building R&D centers in the developing world. Indian and Chinese companies who started as offshoring centers are starting to march back into developed-country markets. Where in the world will the good jobs of the future be? And how will American companies get the skilled workers they need to stay globally competitive?
Moderators
Joy Chen, Lead Member, Global Human Resources Officers Practice, Heidrick & Struggles
Speakers
John Engler, President and CEO, National Association of Manufacturers; former Governor, State of Michigan
Charles Knapp, President Emeritus, University of Georgia
Thomas Kraack, Managing Partner, Global Financial Services Operating Group, Accenture
Ted Sanders, Chairman and CEO, Cardean Learning Group; former Acting U.S. Secretary of Education
12:10 pm - 2:00 pm
This year's traditional session with winners of the Nobel Prize in medicine and the sciences, moderated by Milken Institute Chairman Michael Milken, focuses on climate change. These Nobel laureates are all experts in energy, climate change and alternative fuel issues and will talk about what's realistic and unrealistic in the policy choices we face as we try to slow global warming.
Moderators
Michael Milken, Chairman, Milken Institute; Chairman, FasterCures / The Center for Accelerating Medical Solutions
Introduction By
Michael Klowden, President and CEO, Milken Institute
Speakers
Alan Heeger, Nobel Laureate, Chemistry, 2000; Professor of Physics, University of California, Santa Barbara
George Olah, Nobel Laureate, Chemistry, 1994; Distinguished Professor and Donald P. and Katherine B. Loker Chair in Organic Chemistry, University of Southern California
Arno Penzias, Nobel Laureate, Physics, 1978; Venture Partner, New Enterprise Associates
Burton Richter, Nobel Laureate, Physics, 1976; Paul Pigott Professor, Physical Sciences and Director Emeritus, Stanford Linear Accelerator Center, Stanford University
2:10 pm - 3:25 pm
India, the world's most populous democracy and one of its most culturally diverse nations, has achieved rapid economic growth in the last decade. A booming I.T. industry, global outsourcing industries and cinematic success in "Bollywood" all contribute to impressive GDP growth - 6 percent to 7 percent a year since the 1990s - and set the nation up as the next global growth engine. Its stable political system, well-established legal framework and efficient domestic capital markets also provide a sound foundation for more foreign investment. However, as an emerging market, India faces many obstacles, including inadequate infrastructure investments in transportation, the power supply, water, sewage and ports. And the central, state and local governments do not always speak with the same voice on developmental issues. Will these factors prove to be stumbling blocks along India's path of development? What role will India play in the world economy 10 to 15 years from now? What will India do to address issues of inequality, poverty, and environmental sustainability?
Moderators
Bachi Karkaria, Consulting Editor and Columnist, The Times of India
Speakers
Sabeer Bhatia, CEO, NAVIN Communications Inc.
Ashank Desai, Founder and Chairman, Mastek
Edmund Olivier, Founding General Partner, Oxford Bioscience Partners
Joseph Sigelman, Co-Founder, OfficeTiger LLC
2:10 pm - 3:25 pm
Business often talks about the 80-20 rule, but currently health-care costs are following the 74-26 rule. As Steven Burd, Chairman of Safeway Inc, explained, "Seventy-four percent of the entire health-care spending is spent on four chronic diseases." And with the general exception of cancer, cardiovascular disease, diabetes and overweight/obese complications are directly related to patient behavior. Specifically, these patients are not taking care of the disease in the early stages, and late treatment results in 50 percent to 70 percent of the overall health-care costs.

Although these statistics are staggering, Burd stressed that businesses can correct the health behaviors of their employees by offering economic incentives to lower rising health-care costs.

Billy Tauzin of Pharmaceutical Research and Manufacturers of America (PhRMA) stated that "medicines are a huge potential part of the solution" and should be offered at the onset of illness so that society as whole does not have to pay for mistakes later.

Panelists noted that "behavior matters for auto insurance, home insurance, and life insurance, but not for health insurance." This needs to change, they agreed, while conceding that employees should not be penalized for genetic diseases. Companies that have initiated wellness programs and rewarded employees for good health have realized as much as a 25 percent reduction in health-care costs, they noted, and have also increased employee productivity. Unions, they suggested, should have the same interest as management in finding creative ways to drive down health-care costs.

On a broader scale, the issue of health insurance is both a cost and coverage problem. Approximately 46 million Americans remain uninsured, and insurance premiums keep rising. To address America's health-care coverage challenges, the panel proposed five core principles for reform: (1)the health-care system needs to be market-based: (2) it should provide universal coverage with individual responsibility; (3) it should provide financial assistance for low income individuals and families: (4) it should promote healthier behaviors and incentives; and (5) it should apply equal tax treatment.

Thomas Donohue of the U.S. Chamber of Commerce explained that health-care reform is the "single most emotional political issue in the country." There is no easy answer to fixing the problems, he said, "but business, government, labor and the intellectual community can rally together and get it done." Moderator Earl Rousseau of Health Enhancement asked panelists what they thought the role of government should be. Tauzin stated that government should auto-enroll people who are eligible for coverage, understand why some people choose to not buy insurance, and adjust or reallocate the federal subsidies for employer coverage to truly subsidize those in the system who cannot afford insurance.

Burd stressed the importance of the need to create believers in Congress by proving the potential of a market-driven health coverage system that would lower costs and increase quality. Government can provide the basic information to kick start consumer demand for cost and quality information, he said. Like a market-driven strategy, cost and quality information should be transparent to the consumer. This would translate to individuals being able to access provider information and choose the lowest cost and highest-quality of available treatment. Physicians would have to remain competitive. The value transparency alone could result in a 20 percent reduction in health-care costs, he said.

The upcoming presidential election may be a positive step in the debate over health-care reform, panelists agreed, noting that while none of the current candidates has a well-articulated reform plan, perhaps business will be able to influence them to develop proposals.

Moderators
Earl Rousseau, President, Health Enhancement, Matria Healthcare
Speakers
Steven Burd, Chairman, President and CEO, Safeway Inc.
Thomas Donohue, President and CEO, U.S. Chamber of Commerce
Billy Tauzin, President and CEO, Pharmaceutical Research and Manufacturers of America
2:10 pm - 3:25 pm
As illegal downloads and piracy continue to get the bulk of attention both in the press and in Washington, numerous companies have managed to develop legal models for digital downloads and distribution of content that not only work, but are actually profitable. Whether through cell phones, video-game systems, movie theaters, peer-to-peer systems or advertising-driven, publicly accessible content, innovators have shown that it is possible to make money online without depending on end users to flout the law. Several key players in this field will explain exactly what opportunities exist, and how it is possible to build a stable growing business model around them.
Moderators
Dennis Kneale, Managing Editor, Forbes
Speakers
Phillip Alvelda, CEO, Chairman and Co-Founder, MobiTV Inc.
Garth Ancier, President, BBC Worldwide America
Kurt Hall, Chairman, President and CEO, National CineMedia LLC
Mitch Singer, Chief Technology Officer; Executive Vice President, New Media and Technology, Sony Pictures Entertainment Inc.
Michelle Wu, CEO, MediaZone
2:10 pm - 3:25 pm
With intangible assets comprising upwards of 80 percent of the market capitalization of traded companies, the value of intellectual properties and other intangibles in the 21st century economy is indisputable. Companies and investors are rapidly coming to understand how the convergence of human capital and intellectual assets are their greatest source of both strategic risk and financial reward. In this session, we will survey recent advances in intangible asset finance. How are intellectual property (IP) assets defined, valued, owned and protected? How should companies manage these assets to optimize value? What new opportunities have emerged from the convergence of capital and insurance markets for intellectual-asset finance? Which financial innovations can promote greater liquidity and monetization of intellectual assets? How has the post-Sarbanes Oxley regulatory environment affected intangible asset value and management? How do the answers to these questions vary across IP-intense industries - technology, medicine, fashion, entertainment and environmental industries?
Moderators
Brian Sullivan, Anchor, Bloomberg Television
Speakers
Kimberly Klein Cauthorn, Director, Kroll
Roxanne Christ, Partner, Latham & Watkins LLP
Nir Kossovsky, CEO, TOPCAP
James Malackowski, President and CEO, Ocean Tomo LLC
David Ruder, Venture Partner, Altitude Capital Partners
2:10 pm - 3:25 pm
Rafael Pastor of Vistage International opened the small-business panel with encouraging data for business owners both in the United States and abroad. "If you look at 1998 to 2003, a five-year span," he said, "the barriers to entrepreneurship in virtually every country, developed and developing, have gone down significantly. The world as a whole has become far more hospitable to business, capitalism and entrepreneurship." But more relevant to local owners, he noted, "The number of small and medium-sized businesses in the United States that have exported has quadrupled in a 10-year span, 1994 to 2004." All very promising information for those interested in expanding their borders.

The panelists presented a wealth of experience, ranging leading small businesses to large organizations. Each is currently involved in overseas operations to some capacity.

Loida Lewis of TLC Beatrice, shared the story of how her husband once owned and operated the largest LGO outside the United States. When he died in the early 1990s, the organization fell upon hard times, Lewis, who lacked formal training in business, assumed the position of CEO and was able to prevent the demise of the company. "I reduced expenses by 70 percent," she said. "All the companies that were not doing well I sold. I reduced our corporate office by half and saw the revenue start to go up -- one million the first year, five million the next year etc." By 1997, she was faced with the decision to either sell the entire company or liquidate, and opted to liquidate parts of the organization in Spain, the Canary Islands, Italy and elsewhere in Europe. Currently she oversees 110 convenience stores in China, a venture she considers to be much more challenging than running a large organization due to the one-to-one interaction with staff and customers.

"Basically, what we do is we buy distressed companies in the U.S., ranging between 50 million to a billion," said David Kim of Baja Fresh. "We actually own and manage these companies."

His company is currently taking its retail and commercial brands to overseas markets, but he urged business owners to be very cautious and prudent when considering international involvement, particularly due to various political systems, laws and corruption. He suggested partnering with others who are more familiar and experienced in foreign market environments.

As the managing director of SBI Group, Matthew McGovern discussed how his company is currently investing heavily in public markets particularly in Japan, Hong Kong and Singapore. And Graham Clempson of Mid Ocean Partners in the UK described his company as a private equity business focused on small to medium-sized companies. "We're looking for businesses ideally where we can take ideas and transfer them into either Europe or take them into the States," he said, "or visa versa."

Eran Salu of Business Leader Media described his company as a small magazine publishing company with 60 percent of its business in India. Contrary to the apprehensive attitude taken by some when considering going overseas, he described his experiences as being a "pleasant surprise," particularly when it came to attracting, hiring and retaining staff. The key for him was hiring a well-trained, qualified local to start up and manage the business. Another contributor to the company's success was paying his employees 10 percent to 15 percent above market, which was still significantly less than what would be paid in the States. He offered three tips to those considering overseas ventures: always pay over market, don′t try to "Americanize the business" and avoid the "hot" cities.

Moderators
Rafael Pastor, Chairman of the Board and CEO, Vistage International
Speakers
Graham Clempson, European Managing Partner, MidOcean Partners UK
David Kim, CEO, Baja Fresh
Loida Lewis, Chairman and CEO, TLC Beatrice LLC
Matthew McGovern, Managing Director, SBI Group
Eran Salu, Owner, Publisher and CEO, Business Leader Media
2:10 pm - 3:25 pm
Clean technologies and energy efficiency investments could reduce our nation's total energy needs by 45 percent by 2020. But the rate of adoption is slowed by fragmented information, a lack of capital for up-front investments and the difficulty in monetizing energy savings. Panelists will focus on the opportunities and barriers to drawing investment capital to clean-technology and energy-efficiency projects. What are the current returns on investment? What is the size of the market opportunity? What are the impediments to faster adoption and larger scale? Who is in the ecosystem that can weave together this fragmented market opportunity? What role can regulators, NGOs and legislation play in supporting market-based solutions? What types of organizational and market changes are needed to price and securitize energy savings?
Moderators
Martha Amram, Author; Co-Founder, Growth Options Insights LLC; Senior Fellow, Milken Institute
Speakers
Chris Beekhuis, President and Chief Technology Officer, Fat Spaniel Technologies Inc.
Dickinson Henry, Executive Director, The Jordan Institute
Nalin Kulatilaka, Wing Tat Lee Family Professor of Management, Professor of Finance, School of Management, Boston University
Robert McCann Jr., Chairman and CEO, Nielsen Media Research International
Richard Pietrafesa Jr., Managing Director, Destiny USA
2:15 pm - 2:45 pm
3:35 pm - 4:50 pm
The method for investing in human capital is far from well-defined. However, looking beyond the numbers of every great company, one finds a positive culture that fosters success in its employees from the top on down. On hand to discuss how to create this kind of environment were three remarkably successful businessmen: Steve Wynn, President and CEO of Wynn Resorts; Sumner Redstone, Executive Chairman of Viacom; and Terry Semel, Chairman and CEO of Yahoo!

Moderator Jeff Greenfield of CBS news began the session by asking Redstone his method for hiring employees. Redstone responded by outlining the three C's he looks for in people he works with (Redstone made a point of refusing to say that people work "for" him.). The three C's, he said, are competence, commitment and character, but he made clear that "without character, I'm not interested in competence or commitment."

Redstone said his criteria have served Viacom well, declaring, "We have the best programmers that exist in the world," which has allowed him to take a less hands-on approach in managing Viacom. This is the optimal way to develop a company culture, he said. "Don't be intrusive. Empower the people who work with you to make the decisions."

Redstone said that the combination of his leadership and the skill and integrity of his employees had produced remarkable success. Commenting on fostering creativity while maintaining fiscal discipline at CBS, Viacom's television network, he noted, "I think we have solved the problem where art reaches and meets commerce."

Greenfield asked Terry Semel whether he could utilize the same value system in managing a 12-year-old company Yahoo! as he had at his previous job at Warner Brothers. Semel described great similarities in his strategy for managing the two companies, noting, "It has everything to do with creating a family-type atmosphere, where people are a team and working together and trying to help each other really succeed, instead of competing with each other all day long."

Addressing Yahoo's! ups and downs over the past several years, Semel emphasized the need to think long term and keep employees informed about company developments. He spoke of Yahoo's! quarterly company-wide meeting in which employees meet with him and other executives in small groups to discuss strategy and ask questions about the state of the firm.

Semel maintained that even in his unique position, leading a highly innovative company that is changing the face of human communication, his fundamental responsibility remains the same as that of any other leader. "Over the long run," he said, "my job, the job of any leader, is to motivate the audience, to motivate the team and to give them the encouragement that if they had something that didn't work that well, that they are still revved up and sticking to the strategy going through."

Wynn stressed that the key to fostering human capital is to focus on the simple things. "People relate to the same things in the workplace that they do at home -- kindness, consideration, those simple things," he said. "Every time we come up with a complicated idea in human resources, we can't get it accomplished in a large organization. Simple gets the money. Simple gets the job done."

Wynn described the fundamental challenge of business as "finding a way to make people feel good about themselves doing their everyday jobs, whether their boss is there or not." Wynn Resorts uses several techniques to try to accomplish this goal. The company has a program called "story-time," in which employees meet once a month with their supervisors to tell on-the-job stories. Wynn believes that the program has improved company morale by allowing employees to share their experiences and feel recognized for jobs done well.

The discussion showed that different approaches can be used to foster a company's human capital. Ultimately, these techniques are mostly focused on the same ends, namely, showing employees respect, providing them with room to exercise their talent and inspiring pride in their jobs.

Moderators
Jeff Greenfield, Senior Political Correspondent, CBS News
Speakers
Sumner Redstone, Executive Chairman, Board of Directors, Viacom Inc.
Terry Semel, Chairman and CEO, Yahoo! Inc.
Steve Wynn, President and CEO, Wynn Resorts
3:35 pm - 4:50 pm
Beyond the headlines, the results of economic and financial reform in the wake of last summer's second Lebanese War have been remarkable in Israel: 4.5 percent economic growth in 2006 (8 percent for the final quarter), unprecedented foreign direct investment of $13.4 billion, historical stock market highs, dramatically low interest rates, a budget deficit of less than 1 percent of GDP and the remarkable achievement of becoming a net-creditor to the world. Israel's pioneering work in high technology, the Internet, clean technology, security, biotechnology and agriculture drive growth at home and beyond. Economic growth, however, has been uneven. Israel has the highest poverty rate among western developed countries (24.4 percent), persistent unemployment (8.4 percent) and growing regional and income polarization. Panelists will explore lessons learned in becoming a competitive entrepreneurial force for new technologies and the challenges of transferring these lessons to Israel's vision and hope as a nation and as a leader in the global economy.
Moderators
Glenn Yago, Director, Capital Studies, Milken Institute
Speakers
Doron Almog, Co-Chairman, Athlone Global Security
Joseph Bachar, Director General, Israel Tax Authority, Ministry of Finance
Orna Berry, Chairperson, Israel Venture Association; Venture Partner, Gemini Israel Funds
Raphael Hofstein, President and CEO, Hadasit Ltd.
Joe Zuback, Chief Technology Officer, Senior Vice President, Siemens Water Technologies
3:35 pm - 4:50 pm
All panelists agreed that the Internet is already playing an important role in the lives of patients, as well as physicians, and that its importance will only grow with the time. "Today, eight out of every 10 online users search the Internet for health information," said Wayne Gattinella of WebMD. "This is an exciting time for both physicians and patients. Everyone would be in a better shape if (more)health-care-related information were available online."

Gattinella noted that a million registered doctors are coming to WebMD each month. It is common for large physician groups to turn to the Internet as the source of information, he added. Smaller physician groups have not yet used the web to such an extent.

Adam Bosworth of Google said that Internet users are searching for health-related web sites for various reasons. They may seek information for use as a diagnostic tool concerning their own symptoms; to learn about specific institutions, doctors and caregivers; to search out the latest research and health news; or to locate other people or support groups coping with same disease, particularly in connection with the chronic and recurring diseases.

At the same time, the panelists agreed, while both patients and physicians are turning to Internet, it is important to distinguish what they are trying to achieve. Some doctors feel threatened by their patients' Internet searches of symptoms. The chief problem, of course, is that sourcing may not be accurate or even legitimate. "Doctors have little time to see a patient," said David Agus of Cedars-Sinai Medical Center, "and here comes a patient with lot of printouts from the web. The question is, how useful is the information?"

What is more helpful is when doctors themselves direct their patients to reputable health sites for information. "Seventy percent of doctors actually do refer their patients to web sites," explained Agus. It wasn't so long ago that physicians downplayed the use of online information altogether; nowadays, they're needed as guides through an overabundance of information, some of which is not helpful.

Another challenge lies in electronic health records (EHRs) and patient privacy. With the use of HER, about 7,000 lives can be saved annually, lives otherwise put in risk because of handwriting errors or other simple human mistakes. For instance, said Glen Tullman of Allscripts Healthcare Solutions, 93 percent of all prescriptions are written outside the hospital. But if information on patients were kept easily accessible and available, medication errors and other safety issues would decrease. EHRs can be part of databases so that all the information on a patient is available with a single click. There are privacy concerns, but at the same time, there is a need to share this information, said Gattinella, adding that health information needs to be portable, uninterrupted and transparent. And the Internet can allow all this to happen.

The Internet has also provided employers with better outreach to large groups of people. Corporate awareness of the benefits of employee health are paying off, said Gattinella, and some companies even include their efforts on behalf of employee wellness in their missions statements.

In the conclusion, all speakers agreed that health and the Internet will grow more interconnected. Medical school graduates now have interactive medical educational backgrounds. But online information is simply a means to an end, and physicians and patients need to share their information. And while the Internet is changing how patient-physician relationships develop, it is still just a tool to help people stay healthy, said Steve Downs of Robert Wood Johnson Foundation. And Bosworth noted, "The problem is that a lot of patients are walking with much more information, but still so many of them may have a disease and may be not diagnosed."

It's good that patients come to the doctors with already researched information," said Tullman. In 10 years at most, he added, we will look back at doctors who didn't use Internet today and think their hesitation was absurd. "It′s impossible to keep all that information in your head, so it is normal to rely on the Internet as a source of information that is easily accessed," he said.

The Internet, he concluded, should be used in addition to a physician. "If it's used as a substitute to a doctor, we will fail."

Moderators
Steve Downs, Deputy Director, Health Group, Robert Wood Johnson Foundation
Speakers
David Agus, Director, Spielberg Family Center for Applied Proteomics; Research Director, Louis Warschaw Prostate Cancer Center, Cedars-Sinai Medical Center
Adam Bosworth, Vice President, Google
Wayne Gattinella, President and CEO, WebMD
Glen Tullman, Chairman and CEO, Allscripts Healthcare Solutions Inc.
5:00 pm - 6:00 pm
Those who have been following, or involved in, our climate/energy panels are welcome to join this reception for an end-of-conference gathering to talk how we can move forward on some of the ideas and suggestions put forth during the three days of Global Conference.
Moderators
Martha Amram, Author; Co-Founder, Growth Options Insights LLC; Senior Fellow, Milken Institute
5:00 pm - 6:00 pm
5:30 pm - 6:30 pm
This session is by "invitation only" and is limited to invited guests. If you are interested in attending, please send an e-mail request to jmeehan@milkeninstitute.org.
6:30 pm - 8:30 pm
This session is by "invitation only" and is limited to invited guests. If you are interested in attending, please send an e-mail request to jmeehan@milkeninstitute.org.