Michael Milken PPT

transcript

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

Date: 3/7/13

Advancing Technology

• Cost

• Speed

• Storage

• Access

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%

Other 4%

Latin America

Europe

Asia 5% Latin

America

Canada

1960 Other

Where U.S. Immigrants Were Born

America’s Changing Faces Annual Population Growth Rate (2001-2011)

Blacks

Hispanics

European

Asians

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

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

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

Philippines

Indonesia

Thailand

Malaysia 2014 2009

70% 60% 50% 40% 10% 0% 30% 20%

Source: Eurostat (EU27 projections)

India’s Developing Middle Class Percent of Total Population by Age

2008 2020 2030

Wealthy

Middle Class

Aspiring

Middle Class

Impoverished

Rest of World

India 2%

Global Middle-Class Consumer Spending

China 4% Japan

14% Rest of World

20% U.S.

India 23%

4% Other

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

Skilled

skilled

1950 Today

60% Unskilled

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)

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

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

Enterprises

Mid-size

enterprises

Number of

Enterprises

Number

Employed

GDP Bank

44% 35%

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

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

• 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

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

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

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

Develo

Four million years

produced an 11-year

increase from 20 to 31.

1900 2012

112 years

produced a 37-

year increase.

James Carey: Longevity

Worldwide Life Expectancy

United Nations Development Program

1900 2012

112 years

produced a 37-

year increase.

In some

developed

nations, it

exceeds 80 ...

despite wars

and epidemics.

Life Expectancy in East Asia

1955-1960 2011 40

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

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)

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

• 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

April 28 – May 1, 2013

www.milkeninstitute.org Tony Blair Bill Gates

• 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

Michael Milken PPT

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