Support MI up for updates Subscribe up for updates
About Research Events Centers Newsroom Currency of Ideas
Global Conference 2007 | Program by Track Global Conference 2007 Global Conference 2007 Global Conference 2007 Global Conference 2007 Global Conference 2007 Global Conference 2007 Global Conference 2007 Global Conference 2007 Global Conference 2007 Global Conference 2007 Global Conference 2007 Global Conference 2007 Global Conference 2007 Global Conference 2007
Sponsors
Register Online Now

Program - By Industries Track:

Monday, April 23, 2007

  10:15 AM - 11:30 AM

Director Sydney Pollack Interviews Architect Frank Gehry

Speaker:
Frank Gehry , Architect, Gehry Partners LLP

Interviewer:
Sydney Pollack, Director, Producer

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.

  10:15 AM - 11:30 AM

Green Building: Local Communities Take the Lead

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

Moderator:
Woodrow Clark II , Senior Fellow, Milken Institute; Founder, Clark Strategic Partners

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."

  2:00 PM - 3:15 PM

Is U.S. Losing Its Standing as the World's Financial Superpower?

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

Moderator:
Hal Scott , Nomura Professor and Director, Program on International Financial Systems, Harvard Law School; Director, Committee on Capital Markets Regulation

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.

  3:25 PM - 4:40 PM

Real Estate: What Does the Future Hold?

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.

Moderator:
Douglas Herzbrun , Global Head of Research, CB Richard Ellis

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.

Tuesday, April 24, 2007

  10:50 AM - 12:05 PM

The Future of Energy Prices: A Debate with Boone Pickens and Steve Forbes

Speakers:
Steve Forbes , President and CEO, Forbes Inc.; Editor-in-Chief, Forbes
Boone Pickens , Entrepreneur and Philanthropist; Founder, BP Capital

Moderator:
Brian Sullivan , Anchor, Bloomberg Television

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.

  10:50 AM - 12:05 PM

Today's Successful Internet Businesses

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

Moderator:
Andrew Miller , Co-Founder and President, Internet Real Estate Group LLC

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.

  3:35 PM - 4:50 PM

Crisis Management

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

Moderator:
Howard Rubenstein , President, Rubenstein Associates Inc.

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?

Wednesday, April 25, 2007

  6:30 AM - 7:45 AM

Real Estate in Asia

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

Moderator:
Perry Wong , Senior Managing Economist, Milken Institute



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.

  7:55 AM - 9:10 AM

You Say You Want a [Broadband] Revolution: How Are We Going to Change the World?

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

Moderator:
Lou Lehrman , Vice President, Dutko Worldwide

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.

  9:20 AM - 10:35 AM

Technology: The Next Cool Thing

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

Moderator:
Kevin Klowden , Managing Economist, Milken Institute

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.

  10:45 AM - 12:00 pm

Real Estate and Private Equity

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

Moderator:
Lewis Feldman , Partner, Los Angeles office, Goodwin Procter LLP

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?

  2:10 PM - 3:25 PM

Addressing America's Health-Care Coverage Challenges

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

Moderator:
Earl Rousseau , President, Health Enhancement, Matria Healthcare

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.

  2:10 PM - 3:25 PM

Digital Distribution That Works

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

Moderator:
Dennis Kneale , Managing Editor, Forbes

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.

  3:35 PM - 4:50 PM

Building Great Companies by Investing in Human Capital

Speakers:
Sumner Redstone , Executive Chairman, Board of Directors, Viacom Inc.
Terry Semel , Chairman and CEO, Yahoo! Inc.
Steve Wynn , President and CEO, Wynn Resorts

Moderator:
Jeff Greenfield , Senior Political Correspondent, CBS News

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.


Global Conference 2007 home
 
 
August 2014
Aug 5
Forum: Creativity, Inc.
Santa Monica
September 2014
Sep 18
Asia Summit
October 2014
View All Events
Search all Videos
MI Video Highlight
Global Conference 2014
Leaders on Leadership: Howard Marks, Janet Napolitano, Steve Wynn and Michael Milken on long-term thinking in business, government, education – and life.
Download Milken Institute
Events Brochure
About Us
  Careers
  Contact
  Download Annual Report
  FAQs
  Locations
  Our Team

Blog


Topics

Events
  Associates
  Conferences
  Global Conference
  Partnering for Cures
  State of the State
  Summits
  Asia / California / London
  Forums
  Labs
  Young Leaders

Experts
Newsroom
  Latest News
  News Videos
  Press Releases

Research
  Centers
    Asia
    California
    FasterCures
    Financial Markets
    Israel Center
    Public Health

Initiatives

Publications
  Books
  Financial Innovations Labs
  Milken Institute Review
   Amazon Apps
   App Store
  Research Reports
  Viewpoints
  Search All Publications
Support MI
  Associates
  Donate
  Sponsorships
  Strategic Partners

Follow Us
  @Twitter
  Facebook
  YouTube
  Google+
  LinkedIn
  iTunes U

Related Sites
  Partnering For Cures
  Celebration of Science
  Chairman's Corner
  Melanoma Research Alliance
  FasterCures

©2014 Milken Institute