Montgomery Technology Conference Santa Monica March 7, 2013 Michael Milken Chairman, The Milken Institute Toward a More Prosperous Future
Oct 29, 2015
Montgomery Technology Conference
Santa Monica
March 7, 2013
Michael Milken Chairman, The Milken Institute
Toward a More Prosperous Future
• Perception vs. Reality
• Things That Will Change the World
• Bioscience: An Economic Stimulus
Towards a More Prosperous Future
1. New York
2. Moscow
3. London
4. Dubai
5. Beverly Hills
6. Tokyo
What is the most valuable real
estate in the world?
What is the most valuable real estate in the
world?
Blockbuster $4.5 billion
Netflix $0.16 billion
40 Netflix = 1 Blockbuster
Blockbuster vs. Netflix - 2002 Market Value
Blockbuster vs. Netflix - 2013 Market Value
Netflix $10 billion
Blockbuster
$0
Date: 3/7/13
Advancing Technology
• Cost
• Speed
• Storage
• Access
2013
$.01
1975
$10
Cost of a 1-Minute Phone Call from the U.S.
to India
Telecommunications cost to business
approaches zero.
Download speed
Ten years ago, a T1 line could download 1.2
megabits per second.
Today, a 4G device can download 6.4 megabits
per second.
… and much faster speeds are coming soon.
Source: PC World
IBM System 370/168 in 1976
• 8 megabytes for
$8 million
• Cost per megabyte:
$1 million
Apple iPad Mini (announced this week!)
• 64 gigabytes for $529
• Cost per megabyte:
$0.008
By 2014, there will be more mobile phones –
7.3 billion – than people on the planet.
Source: Silicon India 2/28/13
Canada 2%
Asia
28%
Other 4%
Latin America
53%
2011
Europe
75%
Asia 5% Latin
America
9%
Canada
10%
1960 Other
1%
Where U.S. Immigrants Were Born
America’s Changing Faces Annual Population Growth Rate (2001-2011)
Blacks
1.1%
Hispanics
3.5%
European
0.2%
Asians
3.1%
Source: U.S. Census Bureau
California’s Changing Faces Population 2011
Blacks
2.5 million
Hispanics
13.7 million
European
15.4 million
Source: U.S. Census
Asians
4.7 million
California’s Changing Faces Population Growth (2000 - 2011)
2.9% 21.8% 23.8% Blacks Asians Latinos
European
(4.0%)
Source: U.S. Census Bureau
1990
Top Ten Home-Buyer Surnames California
Source: MDA DataQuick, county records / California Association of Realtors
1. Smith
2. Lee
3. Johnson
4. Garcia
5. Brown
6. Williams
7. Miller
8. Wong
9. Martinez
10. Jones
2010 1. Nguyen
2. Lee
3. Garcia
4. Chen
5. Lopez
6. Rodriguez
7. Gonzalez
8. Hernandez
9. Martinez
10. Kim
• Perception vs. Reality
• Things That Will Change the World
• Bioscience: An Economic Stimulus
Towards a More Prosperous Future
Things That Will Change the World The Rising Global Middle Class
Percentage of Population in Asia’s Middle Class
Sources: Euromonitor; World Bank; CLSA Asia-Pacific Markets / 2010
India
Philippines
Indonesia
Thailand
Malaysia 2014 2009
China
70% 60% 50% 40% 10% 0% 30% 20%
Source: Eurostat (EU27 projections)
India’s Developing Middle Class Percent of Total Population by Age
100%
60%
20%
2000
40%
80%
2008 2020 2030
Wealthy
Middle Class
Aspiring
Middle Class
Impoverished
5%
31%
46%
14%
EU
30%
Rest of World
26%
U.S.
21%
2009
India 2%
Global Middle-Class Consumer Spending
China 4% Japan
8%
Other
Asia
9%
EU
14% Rest of World
20% U.S.
7%
2030
India 23%
China
18%
Japan
4% Other
Asia
14%
The World’s Economic Clout Moves East Leading Cities Ranked by GDP
• More than 20 of the world’s Top 50 cities will be
located in Asia by 2025, up from 8 in 2007.
• More than half of Europe’s Top 50 cities will drop off
the list, as will three in North America.
• Shanghai and Beijing will outrank Los Angeles and
London … Mumbai and Doha will surpass Munich and
Denver.
Source: McKinsey Global Institute (March 2011)
Things That Will Change the World Social and Human Capital
P = Prosperity
Ft = Financial Technology
HC = Human Capital
SC = Social Capital
RA = Real Assets
P=SFti*(SHCi+SSCi+SRAi)
• Universal suffrage
• Universal education and health care
• Police and fire protection
• Religious freedom
• Cultural resources
• Property rights
• Protection of creditors
• Financial reporting standards
Examples of Social Capital
60% of the nearly 1 million Chinese
people with assets over 10 million yuan
($1.6 million) are thinking about
emigrating to the U.S. or Europe.
Source: U.S. Department of Homeland Security (WSJ 2/22/12 “Plan B for China’s Wealthy: Moving to the U.S./Europe)
Human capital
is the largest asset class.
The 21st century will see
a worldwide competition
for human capital.
“Innovation has nothing to do
with how many R&D dollars you
have. When Apple came up
with the Mac, IBM was spending
at least 100 times more on
R&D. It's about the people you
have [and] how you're led.”
-Steve Jobs
Apple vs. Sony 1997 Market Value
Sony $34.3 billion
Apple $1.65 billion
21 Apple = 1 Sony
Sony $15 billion
27 Sony = 1 Apple
Date: 3/7/13
Apple $403 billion
Apple vs. Sony 2013 Market Value
Three Ways for a Country
to Build Human Capital
• Increase education and practical skills
• Import people with skills
• Improve health and quality of life so
people are more productive
Between 1870 and 1950, Americans added
almost one year of education each decade.
By 1960, the highest average grade level in
the U.S. exceeded every other nation by two
years.
Since 1960, we have made no progress and
several other nations have surpassed us.
Source: Claudia Goldin and Lawrence Katz / The Race between Education and Technology
“I believe we can keep the
promise of our founding,
the idea that if you’re
willing to work hard … you
can make it here in
America, if you’re willing
to try.”
- Reelection Night Source: New York Times 11/7/12
20%
Skilled
20%
Semi-
skilled
1950 Today
60% Unskilled
20%
Semi-
skilled
65% Skilled
15% Unskilled
Skilled and Unskilled Jobs
Source: Edward Gordon, “Winning the Global Talent Showdown”
The Jobs Problem
(It Isn’t Jobs – It’s Trained Workers)
125
100
75
50
25
Millions
123,000,000 high-
skilled jobs will be
available in 2020
50,000,000
Americans will qualify
for those jobs
Housing 33%
Transportation 18%
Food 13%
Insurance/pensions 11%
Healthcare 6%
Entertainment 5%
Apparel and services 4%
Supplemental Education 2%
Consumer Spending
Source: U.S. Bureau of Labor Statistics/CLSA
U.S. Asia Food 23%
Supplemental Education 15%
Housing 10%
Clothing 8%
Other 8%
Transportation 6%
Healthcare 5%
Communication 5%
“Big gaps in educational
attainment are present by age 5.
Some children are bathed in an
atmosphere that promotes human
capital development, and,
increasingly, more are not.”
“By 5, it is possible to predict with
depressing accuracy, who will
complete high school and who
won’t.”
James Heckman
Nobel Prize in
Economics
Source: New York Times – July 29, 2008
Knowledge Universe
Early Childhood
Education
Dependent Care
Services
Life Long
Learning
U.S. - Domestic International
Things That Will Change the World Access to Financial Capital
P = Prosperity
Ft = Financial Technology
HC = Human Capital
SC = Social Capital
RA = Real Assets
P=SFti*(SHCi+SSCi+SRAi)
Financial Technologies
• Collateralized loan obligations
• Collateralized bond obligations
• Securitized mortgages
• Securitized credit cards
• Derivatives
America Goes to Work U.S. and Fortune 500 Employment
00 95 90 85 80 75 70
200
180
160
140
120
100
80
60
U.S. = +62 million jobs
Fortune 500 = minus 4 million
New financial
technologies are
fully implemented
Index 1970 = 100
Modern capital
markets begin
Ted Turner Craig McCaw
Bill McGowan
John Malone
Steve Wynn Reg Lewis
Sources: S&P LCD / JPMorgan.
Banks CLOs Hedge, distressed and
high-yield funds
Prime rate funds, financial
and insurance companies
Institutional Investor Base for
Non-investment Grade Loans
Sources: McKinsey
Chinese small businesses create jobs;
Large enterprises get the bank loans
Large
Enterprises
Small
Enterprises
Mid-size
enterprises
Number of
Enterprises
Number
Employed
GDP Bank
Loans
88%
44% 35%
17%
Things That Will Change the World Energy
“This difficult effort will be
the ‘moral equivalent of war’
-- except that we will be
uniting our efforts to build
and not destroy.”
President Jimmy Carter on the energy crisis
and proposed energy legislation
Defending the Persian Gulf from 1976
to 2012 cost America more than $8 trillion.
Source: Stern, R.J., United States cost of military force projection in the Persian Gulf, 1976–2007. Energy Policy (2010), doi:10.1016/j.enpol.2010.01.013
• Aircraft carriers
• War on terrorism
• Wars in Iraq/Afghanistan
• Maintain troops overseas
• Foreign aid
• Intelligence operations
• Oil price volatility
• Homeland security
Traditional Drilling
Spindletop (Beaumont, TX), 1901
Drilling Depth: 1,139 feet
Modern Techniques
Marcellus Shale (Pennsylvania), 2012
Drilling Depth: 9,000 feet
Technology Game Changer
Source: U.S Energy Information Administration.
Major Shale Basins Around the World
Note: Fossil fuels include oil, natural gas and coal.
Source: U.S. Congressional Budget Office
Technology Game Changer U.S. now has the largest energy reserves in the world
17.0 16.6
8.3
5.7 5.5 5.4 4.0 3.7 3.2 2.9 2.4 2.4 2.3
1.2 0.9 0.8 0.7 0.7 0.7
Total fossil fuel reserves, % of world total
Expanded Natural gas Hydropower Geothermal
Biomass and Ethanol Tidal wave power Oil Shale
FORTUNE explored these energy solutions …
Expanded natural gas Hydropower Volcanic (Geothermal)
Biomass and Ethanol Ocean and Tidal power
Source: Fortune Magazine, 1938.
Oil shale
… back in 1938
Divert compressed natural gas from power plants to vehicles.
Source: Fortune Magazine, 1938.
They even had a natural gas plan in 1938.
Things That Will Change the World Crowdsourcing
• Challenge: Develop a breakthrough algorithm that uses
patient data to predict and prevent hospitalizations
• Winning Solution: Create an algorithm that predicts how
many days a patient will spend in a hospital in one year
• Prizes: One $3 million Grand Prize and six Milestone
Prizes totaling $230,000
Improve Healthcare - Win $3,000,000
www.heritagehealthprize.com
• 1,385 teams
• 23,443 entries
• 1,651 participants from 39 countries
• U.S. (56%); AUS (7%); Germany (5%)
• Bulgaria, Brazil, Portugal Poland, Bahrain
Improve Healthcare - Win US$3,000,000
www.heritagehealthprize.com
• Only 1:10 teams have a healthcare background
• Dutch econometrician and a Colorado IT
consultant
• Florida hedge fund trader and an IBM
consultant in Australia
Improve Healthcare - Win US$3,000,000
www.heritagehealthprize.com
Crisis: Deepwater Horizon Oil Spill April 20, 2010
Crisis: Deepwater Horizon Oil Spill
• Oil flowed unabated – 53,000 gallons a day –
into the Gulf of Mexico for three months
• Up to 180,000-square kilometer area
• Time needed to cap the well: 5 months
• Average daily oil collection rate: 2000 barrels
per day
$1.4 million prize
The Challenge: create an innovative solution to speed the
pace of cleaning up seawater surface oil resulting from spillage from
ocean platforms, tankers, and other sources.
The Winners: Two teams recovered oil at more than 2,500-
gallons-per-minute with a 70% efficiency rate. The first-place
winner recovered oil 3X faster than the industry’s best cleanup
rate.
Among the Top 10 finalists …
• 5 teams from the U.S.
• 2 teams from Norway
• 2 teams from Finland
• 1 from the Netherlands
• 7 teams exceeded the previous industry-best
recovery rate
• 7 teams exceeded a 70% efficiency
Team Vor-Tek: A Top 10 Finalist
Fred Giovannitti
• Perception vs. Reality
• Things That Will Change the World
• Bioscience: An Economic Stimulus
Towards a More Prosperous Future
Each life is priceless…
but in economic terms, over the past two
centuries, as much as 50% of all economic
growth can be traced to advances in health.
The Value of Health
Worldwide Life Expectancy
Unit
ed N
ati
ons
Develo
pm
ent
Pro
gra
m
Four million years
produced an 11-year
increase from 20 to 31.
31
68
1900 2012
112 years
produced a 37-
year increase.
James Carey: Longevity
Worldwide Life Expectancy
United Nations Development Program
31
68
1900 2012
112 years
produced a 37-
year increase.
80+
In some
developed
nations, it
exceeds 80 ...
despite wars
and epidemics.
Life Expectancy in East Asia
80
60
1955-1960 2011 40
46.5
75.4
Source: : United Nations, Department of Economic and Social Affairs, Population Division (2011). World Population Prospects: The 2010 Revision, CD-ROM Edition
U.S. Economy
$15.3 trillion
Lifestyle Makes a Difference
Sources: CIA Handbook / Centers for Medicare and Medicaid Services (2009)
30% is spent on
hereditary diseases.
70% of health-care spending –
about $2.5 trillion – is spent on
lifestyle-related diseases.
The March - 1998
National Institutes of Health Budget $US billions
$5
$10
$15
$20
$25
$30
98 99 00 01 02 03 04
Source: National Institutes of Health
05 06 07 08 09 10 11
$200 billion
Outlook for Biomedical Research Spending (2012)
20%
10%
0%
-10%
China India
Brazil Korea Japan
Germany
Australia UK
France
US Canada
Source: OECD – Government Budget Appropriations or Outlays for Research and Development (2012)
Singapore
An organization dedicated to shortening the
time to find cures and better treatments for
all life-threatening diseases
In theory, 300 mph …
In practice, same speed as 100
years ago.
19th/20th-Century Tracks
19th/20th-Century Thinking
• Demonstrate returns on bioscience investment
• Honor achievements in scientific research
• Illustrate the potential for future advances
• Recommit to funding medical research on a
national and international basis
Elizabeth and
Ariel Glaser
November 7, 1991
The Berlin Patient Timothy Brown
First person cured of AIDS
• Recent research reports
that bone marrow
transplant resulted in a
new immune system
“Baby Cured of HIV
for the First Time” - WSJ 3/4/13
• Treated with an aggressive
regimen of drugs just after her
birth 2½ years ago
• “We can’t detect virus activity.” Deborah Persaud Pediatrician/AIDS researcher
Johns Hopkins University
We are entering an
“Age of Precision Medicine.”
Sequencing the Human Genome
2003:
• 13 years
• $3 billion
Today:
• A few hours
• Approaching $1,000
Pathway to Treatment
The Next Challenge:
Alzheimer’s Disease and
diseases related to aging
Create a legacy that relegates cancer
and other life-threatening diseases to our
children’s history books.
Milken Institute Global Conference 2012
www.milkeninstitute.org
Milken Institute Global Conference 2013
April 28 – May 1, 2013
www.milkeninstitute.org Tony Blair Bill Gates
Milken Institute Global Conference 2013
• Finance
• Industries
• Regions
• Education
• Philanthropy
• Health
• Climate/Energy
• Government
• Media
April 28 – May 1, 2013
www.milkeninstitute.org
Montgomery Technology Conference
Santa Monica
March 7, 2013
Michael Milken Chairman, The Milken Institute
Toward a More Prosperous Future