Episode Transcript

Mo Lidsky  00:06

Hi, and welcome to today's session of Lunches with Legends™, where we connect with some of the most illustrious individuals in the financial world, while supporting vital healthcare in our communities. Before we begin, I'd like to thank the key sponsors of this series, especially our gold sponsor KPMG. We are deeply grateful to KPMG for their friendship and very generous support. We would also like to thank our three silver sponsors, Venterra Realty, Creaghan McConnell Group and TD Bank. We are so appreciative of your generosity. I want to remind everyone that 100% of the dollars you donate through this event will go toward COVID-19 relief and pediatric mental health. When Mike Milken, our speaker today, heard that, he offered to personally send and sign this book right here, 'Conversations with Mike Milken', to anyone that gives $1,000 or more today. If you have not already made your donation, please take a moment go to the donation page at the top right of the site. We would greatly appreciate your support. Now without any further ado, I'd like to introduce our very special guest today, Mr. Michael Milken. Mike has been one of the true American innovators, both as a philanthropist and as a financier. Beginning on Wall Street in 1969, he revolutionized capital markets by expanding access to capital for thousands of companies and entrepreneurs. His philanthropic efforts through the Milken Family Foundation paralleled his financial career where he's been at the forefront of many diverse initiatives on education, public health, and medical research. Mike is the chairman of the Milken Institute, a nonprofit nonpartisan economic think tank with a mission of expanding prosperity worldwide. He's also the Founder and Chairman of Faster Cures, an organization working to build a patient centric system where science-accelerated unnecessary barriers are overcome, and lifesaving treatments reach those that need them as rapidly as possible. As well, Mike is the chairman of the Prostate Cancer Foundation, the world's largest private funder of prostate cancer research and the Milken Institute School of Public Health at George Washington University. In March 2020, Mike launched a series of podcasts titled 'Conversations with Mike Milken: Leadership in a Time of Crisis', where he convened over 100 global leaders to help better understand and respond to the coronavirus crisis. He and his wife Laurie have been married since 1968. That may be his greatest achievement. Together they have three children, 10 grandchildren, and they are signatories of the Giving Pledge where they've committed the majority of their wealth to philanthropy. Ladies and gentlemen, it gives me such great pleasure to welcome our distinguished guest, Mike Milken. Mike, welcome to Lunches with Legends™.

Michael Milken  03:19

It's great to be with you and I look forward to learning what all those books are in the library behind you.

Mo Lidsky  03:27

Sounds great. We'll get to that in the Q&A. Let's start at the beginning. You grew up in a suburb of Los Angeles in the 40's and 50's. It was naturally a very different time and place from today. How would you describe your upbringing and the influence that it had on your life and some of the things that you've done since?

Michael Milken  03:52

I think you'd have to go look at that TV show, Happy Days, which came out that reflect that period of time, it was growing up after World War II. I am the oldest part of the baby boomers, those born in 1946 and it was a dramatic change that occurred from our parents, often described by Tom Brokaw and others, as the most caring generation that had lived through the depression, lived through World War II. Their safety, survival, in many ways was dependent on government. The group born in 1946, we're told and the rest of the baby boomers to '64 by their parents, that they could be anything they wanted to be. They could change the world; one person could make a difference. It was in that environment that I grew up in. It was a strong community. In Los Angeles pretty much everyone went to public school. You had a long a large breath from people lower middle or poor to people that were upper income or wealthy at the same school. From that standpoint, you went to school with people in the neighborhoods. I rode my bike to school, but community was a very important period of time. As the country recovered from the World War II and the United States at the time economically now was the most important country in the world and launched programs. I would say the 40's and the 50s symbolize that we did have the Korean War. But at my dinner table at night with my father, mother, and brother, and later my younger sister, we discussed world events. You had to be prepared to discuss any topic, at any time. As I reflect on the events that occurred over this period of time, somewhat, my life's path was set. First by Sputnik in 1957 that went up and my decision to focus on science and mathematics. It woke up the United States. Many people thought that Sputnik was the finest day, and, in a debate, I had on national television, I guess with Putin many years ago, Sputnik, as he discussed it was representative of the superiority of the communist system of the Soviet Union. But what it did is it woke up the United States. NASA was formed, DARPA was formed with a goal that the US would never be behind. It was cool to be a mathematician or a scientist. The country dramatically changed support for people in what we would call STEM today and I was a student in that area and in '57 wrote a letter to the President, letting him know that I was ready to run the space program. Unfortunately, I never heard back nor was I drafted.

Michael Milken  07:10

I would say but focusing on data as a young age, my favorite book was the Almanac. I had a little flashlight under my pillow and when I was supposed to be asleep, I, after the house quieted down, I could take out my Almanac and study statistics. I'd say the next major change that occurred was in 1965. I was home from Berkeley; the Free Speech Movement had occurred. Often when I go someplace, there's a commotion shortly thereafter The '64 Free Speech Movement was really the first year the baby boomers went to college. It was centered around many things, who publishes the school newspaper, what are the role of students in administration, and it was a peaceful demonstration. But I came home, I was working during the summer in Los Angeles, and something that became known as the watts riots occur. August 11, 1965. And Los Angeles was on fire. This was the city of dreams, the entertainment industry, I had spent considerable time in South Central LA growing up with my dad. I couldn't understand why the city was on fire. It wasn't an eastern city, where you had more segregation, etc. And eventually, I met a young African American man that told me, he would never get a loan to go into business, his father, who had great ideas, no one would ever give him capital. And he would not be part of the American dream. So, I went back to Berkeley changed my major to business and focused on this issue of credit and access to capital and the democratization of capital. I'd say the next major event that occurred was in the early 70's. I had gone to Wall Street to change how money flowed, and this access to capital issue, and work in both Wharton and Berkeley. Then my father, mother-in-law, were diagnosed with advanced cancer and our children had some serious medical problems. So, you have a plan, life gets in the way and now you're directed a considerable part of your efforts into a field that you never thought you would be in. As I reflect back on these events in history for me, the watts riots and democratization of capital, the family like so many others, that was affected by significant health and life-threatening health challenges. I would say the last change is, I made the decision in the mid to late 70's to move back to Los Angeles from New York, our department. I moved and offered everyone an opportunity to move with me and I wanted our children, my wife, Laura, and I, to know my father before he died. We thought we had done everything provided opportunities for everyone housing, their religious interests, and preferences, jobs for spouses, significant others, time, opportunities for relatives to come and visit. What we did not invest enough time in was education. Where the children would go to school. Busing started in 1978, in Los Angeles and around the United States. It became a central issue for the employees and their children, and eventually was one of the main causes of the creation of the Milken Family Foundation, to institutionalize our support for healthcare and education. Today, 50, 60 years later, each of those has been the path I've traveled: healthcare, education, and democratization of capital. Each, I can trace back to some event in my life, as most people would.

Mo Lidsky  11:44

There's a lot here to unpack. I wanted to take it one step at a time. First of all, you've mentioned this over the last 50 or 60 years. When I originally was doing the research on you, I came across a number, which I just didn't believe. The fact that you've raised hundreds of billions of dollars for medical research, and I've later confirmed that, and probably why Fortune Magazine named You the man who changed medicine. But you know, the interesting thing is you've taken your philanthropy, a pretty active engaged approach with your philanthropy, where you've worked to improve collaboration between researchers and industry, academia, policymakers, philanthropists, etc. I guess the question that I would pose to you is through that entire journey as an active philanthropist, what would you identify, as the most important lessons that you learned, and perhaps even if you knew, then what you know, now, you might have approached philanthropy a little differently. But let's start with the most important lessons you've learned from that experience.

Michael Milken  12:47

I'd say in the early years, because of my economic theories and trading, I became independently wealthy at a very young age, in my late 20's. I'd say if I was to define another seminal moment in philanthropy, I had come home to discuss with my dad, these economic theories I had developed at Berkeley, capital structure at Wharton and then during what I consider the most important financial period post World War II, 1973-6, 1973-7. These proved out in what you might call in medical terms, an epidemic. Stock market went down 50%, interest rates doubled. You put in credit controls where you're not allowed to borrow money and so on. I wanted to share this with my dad, but I couldn't. Because he had a reoccurrence of his melanoma. What I discovered is I could refinance a company; we could support a country and their capital. But here, I could not move science fast enough to save my father's life. I had the real first definition of a problem was something that could not be solved with money, no matter how many dollars you brought to bear science, in this case, melanoma from my father and other forms of cancer from my mother-in-law would not move fast enough to save their lives. I could visit every Cancer Center at the time. I really reevaluated how you could accelerate science and I'd say the lessons learned are one, young scientists, young investigators. In the beginning we gave a great deal of money to people at the peak of their career. We discovered very little occurred after that point in time, but if we could identify those people in their early 30s, who had spent 10 to 15 years in residency, internships, molecular biology, PhDs, MDS, fellowships, et cetera, who are starting out with their laboratories. And as I sat back and analyzed, a lot of people win Nobel prizes in the sciences when they're in their 60's or 70's, but for the most part, it's ideas they had in school and college graduate school that were developed. The highest rate of return, I would say, we've had on our philanthropy, over 50 years has been supporting people at this point in their career. I would say the analogy would also go to our efforts with teachers or our efforts with entrepreneurs, and so on. One of the lowest rate of returns we have ever had is giving people money at the peak of their career. Number one, they probably have the ability to raise money independent of us, so us giving them money didn't really make any difference. Two as they've moved into different roles in their life, very small percent later received funding for new ideas and new developments. So, I would say that lesson learned.

Michael Milken  16:22

Number two, in the early years, we're very focused on financial support. Later years, we were very focused on changing the paradigm. If you didn't share your information, we didn't find it. Now, many people would tell me that their work is so important, wait till the article comes out in nature or in the New England Journal of Medicine, then they'll share, and we told them that their work was so important that they didn't need our money, anyone would give them. And generally, within three to six months, everyone decided they could share, they could share their data. And we created this environment where they had 10 to 15 minutes to share their data, and then open themselves to questions and feedback from large numbers of other scientists, I'd say that the other thing in philanthropy is the realization that there is no wealth in the hands of any individual. Today, Elon Musk, or Jeff Bezos, or Bill Gates or the Gates Foundation plants Buffett, compared to government. And so, if you can redirect government funds, so spent five years preparing for something called the March, which occurred in 1998. And whereas every human life is priceless. And as you know, one of the great books tells us that if you save one life, you save the world. But in making an argument to government, you need to make an economic argument. So, between the years of 93 and 98, I had spent five years with many others, making the economic argument that we needed increased funding for medical research, doubling the NIH budget, tripling the National Cancer budget, increasing FDA, CDC, and so on. 1000s of people had worked on this unsuccessfully. So, we eventually put on a march brought a half a million people to Washington and around the country to medical centers. And within a short period of time, I think within less than a month, President Clinton signed into law, the doubling of the NIH budget, the tripling of the NCI budget, and there's been an incremental, almost a half a trillion dollars now invested in bio science in many of the advances we have today. Were due to this investment that had been made of what President Clinton signed into law, the Human Genome Project and others spun out of this effort. So, I think realizing, government can you read direct, how government spends its money, how it invests its money, if you can, it's far larger than any philanthropic funds in medical are about 3% of the money spent government, industry etc. But it is the venture capital. So, it gets things started, but then you need industry, and you need government to support it after that.

Mo Lidsky  19:56

Speaking of just getting something started, and again, we're going to turn momentarily to our more mundane world of Wall Street Bay, street finance, economics, etc. in investing but before we do that, I just want to touch on one last thing because we can't really leave medical research without touching on the Coronavirus. Especially since you've been so involved in pushing for accelerated vaccines and therapies. Could you share with us a little bit about your involvement there and the link between your historic focus on cancer research and the virus?

Michael Milken  20:36

Okay, so I was in Johannesburg, I had Milken ns to puts on about 250 events around the world physically. The last one kind of was in Johannesburg. In February, even though we did get permission from Singapore to put on our Asia conference on for about 10% of the attendees about 200 people a month or so ago. And I was flying home, and you could see what was about to occur in the world. This pandemic spreading throughout the entire world was in front of us. And so, to link to what you've said, Jonathan Simons, who runs the Prostate Cancer Foundation, but is with the founder of the melanoma research, faster cures and others and had at the Cancer Center in Atlanta, that he was the first head of before he joined us. I asked Jonathan to lead the effort and in looking at everything that ever had worked in cancer, which might be applied in COVID-19. And what in cancer research, one of the main developments in the last 10 to 15 years that we've been funding since 94, and five has been immunology to energize your own immune system. Jim Allison won a Nobel Prize a couple years ago for this right and so when you energize your immune system, there's three reasons you got cancer one, your immune system had been weakened.

Michael Milken  22:19

Inflammation a number one factor. Number two, you’re the cancer was disguised. If you were a Star Trek fan, like a clean on warship, it was cloaked. And it didn't read it. Or three, it was turned off or not turned on. Jim worked on the turning on of your immune system. And when you turn it on, often you overstimulated and you get that cytokine storm that we were reading about, that goes to your lungs in a led to the death of so many people. But in order for a cancer drug to be successful, it had to deal with this cytokine storm. And so, I asked him to lead the efforts and we launched clinical trials. And we discovered when we looked at Italy, that only four or five men were who were on ADT drugs, androgen deprivation therapy used in prostate cancer for decades, died, who were older, and it appeared that by shutting down testosterone, you prevented the creation of a protein called tempers to which was needed in order for this virus to get in your lungs. So, man on this androgen deprivation therapy, which is a generic today and widely use, you could potentially substantially reduce but other treatments CompStat had been used in in Japan, etc. Jonathan lead, so that's your link. The other element is, as I reflected on 50 years, what did we need to do? So, the first thing we did is we redirected with all the 10 centers of the Milken Institute to work on COVID. If you were Mike, running the Center for Financial Markets, your job was to create financial safety nets with the governments around the world as to what could prevent a complete meltdown of the economy's at this time losing. We figure the us it was costing a minimum of 1 trillion a month. Therefore, ramping up investments in BARDA building manufacturing before you knew it worked, making millions of doses of a vaccine antiviral antibody before you know it works is, so you shifted the risk but the cost to society and the human cost was so great that you needed to accelerate, and we launched something called the tracker. And you can go to the Milken institute.org or faster cures.org. And we have been monitoring what's now about 540, vaccines, antivirals, and antibodies. And where they are in the development talking to them what, whether they need capital, financial capital to accelerate, what does it mean, for regenerome, to shut down their plant in the United States making a current drug that they provide to people so that they could be prepared to prepare their antiviral drug for COVID. And it takes six months to convert over. So, the 200,000 doses that you're getting of this anti-viral to prevent it from going to your lungs today, are available because they made the decision to shut down production and shifted to Europe. Roche made the decision to shut down production and one of their plants. And now they're making 200,000 of the regenerome, antivirals, collaboration.

Michael Milken  26:22

One of the key failures that we discovered in the particularly in the 70s and 80s, you now have companies collaborating partnering, we read that Gilead had opened up their patent library allowed generic manufacturers in India or Pakistan, to make their drugs without royalties, and so fierce competitors now we're partnering to produce change production levels. And so, the lessons learned were, it might not work. But are you going to spend one to two years building a plant or changing production, if it did, the cost to society is too high? Right? From that standpoint, so all these have been applied today. The distribution, which we've shifted to, has been, in many ways, disappointing. major medical centers, many of them have been more concerned that someone jumped the line than getting them all out. And you've seen now more and more countries, more states in the United States and unsure in Canada provinces, are going to make it simplified. I don't know if anyone on our audience is old enough to have gone to Disneyland, when you had an ABCD and E ticket, all these different tickets you had to rip out and get for the rides? Well, it's a lot easier when you announce anybody over 65 can get the vaccine. It's not confusing, or anyone working in the medical area or anyone in a nursing home. So, you've broaden this distribution. But this is a miracle of science. And the advancements in technology today, the idea that you can find a cure for a life-threatening disease that did not exist in the person's lifetime, is something that you could not have hoped for. Right? You know, 15 years ago?

Mo Lidsky  28:40

Incredible, the work that that you've done on this front.

Michael Milken  28:43

These little books that you held up, and yeah, they get Volume One and Two. They serve different purposes. One, the people Francis Collins, who runs the NIH was the first. We wanted everyone in the world to know what Francis Collins was doing, not just what I was doing, or what I was trying to encourage him to do, right. And so, the first one is maybe half people are involved somewhat in medical care, etc. The second one, was much more involved in what was going on in society. So, 30% of the people in Volume Two are women. 20% are African Americans, whether they're in Canada, the United States, or in Sub Saharan Africa, right? With the challenges of what was happening. I reached out to the heads of three or most three of the five most valuable companies in the world to show what they were doing, how they were deploying their capital. How you could use their technology, we went to three of the five most valuable financial institutions in the world, to show how they were providing access to capital to everyone and how they might engage. You had a chance to interview Robert Smith not too long ago, with Robert, our Center for Financial markets, and we worked on how are we going to get financial capital into minority financial institutions, small institutions, which has now been passed in this latest bill? How are we going to deal with financial deserts? How are we going to deal with food deserts and food security? How are we going to deal with health deserts where there isn't a medical clinic in a neighborhood? So, each one of these whether it was Robert, in financial or someone else, we interviewed with the idea that anyone could listen, anyone could see what their strategy and anyone maybe could follow up if they had a better idea.

Mo Lidsky  31:05

Let me change the topic but use that as a springboard towards finance and towards the opportunities that you're seeing. We've talked a lot about philanthropy, but I want to talk a little bit about your influence as a financier. When you and your colleagues at Drexel, you finance much of the early growth in industries, cable, cellular home, building hospitality. By virtue of expanding all this capital for thousands of smaller companies, you've also helped create millions of jobs. What you're describing right now is kind of some innovations happening in Wall Street, but if you think about the Wall Street you came into in 1969 and the Wall Street of today, what are some of the fundamental differences that you're seeing? How do those differences translate into risks or opportunities for investors today?

Michael Milken  32:05

The world that I came into, basically believed in high grade credit, and stocks. And I joined a firm that was the leading research firm. To solve the delivery of securities problems in the late 1960s, you had many of the firm's failing, because you have physical delivery, and I had made sure to Morton and operations research, information systems and finance and my understanding with them is I would help work on solving the delivery of the certificate problem, which eventually became a central depository. In exchange, they would publish my research from Wharton. And that world, there was maybe 400 companies, 500 companies, their investment grade and 10 million that weren't. And they were all focused on providing capital, and there were maybe only 10 institutions that played a significant role who had access to capital. And so, I went to Wall Street to try to democratize this effort that has occurred, there was a lot that occurred in 1970s, particularly the success of these theories that made it happen. And by the mid-1980s, you see total opening up of financial markets. And if you look at job creation, in the 30 years, from 1970 to 2000, investment grade companies created minus 4 million jobs. And more than 62 million jobs were created in the private sector by non-investment grade companies. But when you look at the fifth most valuable company today in the world, Tesla, it's not investment grade that might make investment grade. They have a couple billion in debt and 800 billion in market cap, it's hard to understand. But mostly companies of the future are non-investment grade CrowdStrike leading company in the cybersecurity area has a market cap of 50 billion, it's not investment grade also. And so, what all sells are all mobile, all these different industries. In so the opportunity I had, was really a to me an unbelievable opportunity in the sense that I could mirror access to capital to people with ability. And I had scribbled this formula down in 65. That prosperity, p financial technology served as a multiplier on The world's greatest asset, human capital, second most important assets, social capital, and then real assets, which you find on a balance sheet. And except for professional sports, the people aren't on balance sheets. And Bill McGowan. At one point, when I first met him, I think he had 30 or 50 employees at MCI, AT&T had a 1.4 billion. But providing capital to bill was not really risky. He had more ability more vision than others, or john Malone, or Ted Turner, Steve Ross are hundreds of others. And so, once you saw the Marion have access to capital, which by 1983, reopened the markets to people with ability, the world change. Now today, there's more than 100 financial companies that are ladder, headed by people that work for me, or work with me.

Michael Milken  36:03

The knowledge of this has spread around the world in these markets, the world and financial markets are much more sophisticated, today are much more data driven than they were, when I went in 1969, you had people that looked at stocks, and didn't think I even bought the rating was and one of the things I use to change people's opinion was, most of the time, if you looked at their cell list, the company's recommended were investment grade. So, if you looked at what they were suggesting, that is not the future. And if you looked at their buy list of what the companies were the future, they were not investment grade, and they never bothered to look at the data of these companies. So today, hundreds of difference times, or 1000s of different kinds of securities have been created. The failure of the nifty 50 and the 1970s investing, created the mutual fund industry, and explosion. And so today 10s of 1000s of financial institutions are making the decision on who has access to capital and it's a much different world. You also have had the growth of an industry, particularly the software industry, which generates enormous free cash flow. And so, when you look at a company like Amazon, or Google, or Facebook, for example, that do not pay dividends to their shareholders, they accumulate enormous liquidity. And in many ways, they have become venture capitalists and investors today themselves so many of the new technologies are entrepreneurs, sell selves are providing the capital to them, to start their businesses test out new ideas. From that standpoint, I think net of debt today, Google would have the greatest cash, whereas Apple has the most cash, they have a lot of debt. Google probably has the most net cash of any company in the world. So, the markets are much more sophisticated. And so, you see, when people telling you the world's coming to an end, in 1974, we were buying debt for its coupon. I never thought again, in my lifetime, you would have that opportunity. In Oh 809, you had that opportunity again. But as people told you, in this last go around, that never really occurred and the distressed funds and everyone waiting to buy distress. It's like Waiting for Godot, if they didn't step in, they never bought from that standpoint and the sophistication of instruments today, one of the things that we focused on was the idea that how you finance a business or how you finance an industry varies depending on the risk in that industry or that business. Today, you have all these different forms of instruments, some companies need to be financed primarily with equity, others can have larger percentage of debt.

Mo Lidsky  39:33

Mike, I just beg you to actually ask you a personal question, particularly because virtually all of the participants online are active investors and family office principals. I everybody would be quite interested in learning how you are investing your own money, or your own family office is investing today and what do those allocations say of your personal values or your beliefs about the future?

Michael Milken  40:02

Well, first, from a conflict standpoint, my strong belief in life sciences, if I wanted to link simply for you, the investing and life sciences, more than 50% of all economic growth in the last 200 years can be traced to advances in public health and medical research. Most people don't reflect on the fact if I just took the United States, for example, that one in five people in the United States died before their fifth birthday in 1900. Today, by the time 20% of the people pass away, you're in the low to mid nine, you're 6060 to 6364. And 1900, life expectancy on planet Earth was 31. That was average today, we're now approaching in the 70 area, probably the greatest achievement of humankind has been this extension of life, not only the extension of life, but the improvement of the quality of life to over the last 120 years in the first four. Let's, let's say probably the first I'm trying to think how many million years but let's say 4 million years of evolution, you extended average life expectancy by about 11 years. In the last 120, you've extended it by 40, some odd years, and who knows what the future brings. So, we have been very focused on life sciences. Now, in order not to have a conflict with our medical foundations and others, we might invest in, contribute the shares to our foundations, so that we don't personally benefit but in many cases, our medical foundations have put up the money, but don't take any equity, because our goal is to accelerate science. And I would say, if I looked at what's the Prostate Cancer Foundation, they've had 13, or 14 drugs approved, probably worth more than 100 billion collectively we are benefits benefit was that millions of people are alive, the death rates dropped by 52%. And we elected not to participate in form of equity. Now, I can't sit on a trading desk today. And I'm assuming many of the people listening to our interview today can't. So, I've been focused on investments that are a little longer term, where I don't look at them on a daily basis or a weekly basis. The creation of specs. And the growth of SPACs over the last few years, but particularly last year, has created a unique opportunity for investors. And we have been one of the major investors in this area in our family office. And why halfway? Well, if I buy a US Treasury bill, I get about five basis points after tax. So therefore, whether I get zero or five doesn't really make much difference. I can buy a SPAC and I'm backed by the same treasury bills, that if they have warrants attached, and we sell the warrants, then instead of five basis points, I might be able to get 2%. On to your paper come the worst thing that can happen to me as they get to the best is that I get a significant rate of return in that they buy a great company and I elect to roll forward. There are a lot of challenges. And in the world today, there's challenge to our free enterprise system, is it meeting the needs of the people? You know, my father, drilled into me when I was eight years old that there aren't opportunities for everyone. If everyone does not feel they have a chance, then there might not be opportunities for his grandchildren. Therefore, the challenges were seen when 50% of people under 30 thinks socialism or communism might be better. It's a wakeup call and are we meeting the needs of the citizens.

Michael Milken  44:40

One of the challenges we have is that many people have pension funds, are investing in private equity or venture capital, but they don't necessarily know it or know the names of the organizations that their pension funds are invested in, or their foundations are investing in because they've given the money to someone else to manage. We feel it's exceedingly important today that the public once again, feels part of the system and is benefiting from the system today that the United States has the highest percentage This is a study that Credit Suisse puts out the highest percentage of its population that are millionaires at about six and a half percent to 7%. This is the same as Australia of any country that has more than 20 million people, Switzerland, or Singapore would have a higher percentage, but much lower population. But the United States also has among all developed countries, among the highest percentage of its citizens 28 to 30%, who have a net worth under $10,000. So, this enormous disparity that's occurred. And when you read these statistics, that 40 50% of the population could not come up with $400, without going to a pawnbroker borrowing against their future salary, going to family, to meet a medical emergency, there are only one medical emergency away from financial disaster occurring. And so, the challenges so this is an area that we are focused on investing in both philanthropy from a philanthropic standpoint, and from our family office, how can we create opportunities for people to get access to capital to pursue their dreams? Or at least try? How can we provide educational opportunities for young people so that they have the knowledge that they can participate in a knowledge society? And so, this is one of the key elements behind both our investment strategy and our philanthropic strategy?

Mo Lidsky  47:23

Could I double click on that a little bit? I recall, a number of years ago, you're giving a talk on the impact of changing demographics. I think at the time you quoted the French philosopher, saying demography is destiny. Is that concept still applicable today? If you're looking into the future, and you're making investment decisions that deal with demographic issues, what current trends are you paying attention to? What industries? How are you expressing that belief?

Michael Milken  48:02

I believe it is truer than ever. You know, as we look at China today, if you went to medical school in China, 30 years ago, you never study diabetes. Obesity was not an issue. Now China has the most people with diabetes in the world 40% of their populations obese, they've changed from a plant-based diet to more of a Western diet. There's gone from zero to 5000, Kentucky, fried chicken, McDonald's, etc. and China. And they will, at the current rate, might have more people with diabetes than live in the United States. So, they have a challenge. Yes, they've had a much higher savings rate. But they haven't built Medicaid systems to support people as they get older. If you look at the world today, China is aging as fast or faster as almost any country in the history of the world. Korea also so whereas median age, and China's a little bit below the United States, at one point, it'll be substantially older than the United States. Demographics The United Nations and our work at the Institute has projected that almost the entire growth in the world's population net in the balance of the century will be in Sub Saharan Africa, an increase of 3 billion people. Well, what are the jobs? What are the opportunities 50 million people came from Europe to the United States in the 1800s? For religious freedom, opportunity, food, and all the other challenge no airplanes, risky travel. 50 million, what happens if one or 2 billion people are on the move if you don't create opportunities in those areas, and so, we've been very focused on a philanthropic area with setting up the scholarship program with the IFC, international finance carp and our Center for one of our 10 centers are center for global market development in training. future leaders, financial leaders bring him to the United States for nine months to go to school, and internships in their 30s, and they agreed to work for their government, optimistic, patriotic, etc. And we counter parties for economic development, investing in entrepreneurs or creating those companies in these emerging markets to create jobs. Nigeria whose population is 60% of the US has twice as many children born in 2019, as the United States. So, the United States has the lowest recorded birth rate in the history of the United States. And far less children born even though the population is substantially larger than were born in the 19, late 1940s, early 1950s. So, these demographics, the US will become a Latin American, Asian country, by demographics. So, if you wanted to sell residential real estate in California, and you didn't notice Smith and Jones were no longer the number one surname, the top 10 surnames of people that buy homes in the state of California are all Latin American Hispanic surnames, or Asian surnames. And so, looking at the United States, and wondering what's going to happen, and how it's going to change is the realization that in a number of states, less than 25% of young children are of European ancestry. So, you might think you have a common heritage. But at some point, in this century, the history of Asia and the history of Latin America will play a much larger role. As they rewrite the textbooks in the United States, I remember it was 1979, gold had gone to 800 an ounce silver, had gone to $50 an ounce, there was more volatility in US government bonds in one day than the entire decade of the 50s.

Michael Milken  52:55

I had called a number of my friends in Toronto and Vancouver and told them that it looks like natural resources here, access to water. So, I'm thinking of moving capital out of the United States and recommending to the hundreds or 1000s of companies that we should be invested in Canada, who has abundance of natural resources and other things. And they told me, that's great, because they're thinking of moving on their capital on a Canada into the United States. So, we can just do a trade right now on the phone. But they were very focused on government leadership at the time government policies at the time. And so for the last eight years, we've been building the Center for the American dream in Washington, DC with a small a, that has these four pillars that has dominated my life that we believe underlines the American dream, financial inclusion, the educator and education, medical research and public health and the entrepreneur in innovation, to serve as a symbol of stories and telling stories of hope, but also recognizing so we're calling it the Center for Advancing this dream. Because we recognize that where you're born, might determine your upward mobility, whether you have access to capital might determine your upward mobility.

Mo Lidsky  54:40

Mike, I want to come back to something you said earlier. So much of what you're doing is investing. Whether it's young researchers, whether it's young entrepreneurs, whether it's future political leaders. Again, this investing in talent, as it were, and it struck me, and you said this earlier in the conversation that so many of your colleagues and you know people that worked with you and for you at Drexel are now running sort of the top financial institutions around the world. It's glaring. I mean you think about industry legends today like Steven Feinberg observers, Anthony Wrestler, Aires Leon Black Apollo, Josh Friedman, Canyon Kimolos, I could go on and on. What was in the Wheaties at Drexel Burnham? How did you manage to cultivate so much talent in the firm during your tenure, and particularly as investors think about asset classes where there's this wide dispersion of returns, talent is everything? So maybe you could share your thoughts before we probably only have time for one more question thereafter, on how you cultivated that talent within Drexel.

Michael Milken  55:55

I searched for people that wanted to be on a mission and believed we were doing something whether there were very few people that believed in the mobile or cellular industry or the cable industry. But the idea of matching access to capital to people. If you measure human potential or capital, it's measured in the hundreds of trillions of dollars, it dwarfs. Just two things happen. In the mid to late 1990s. Steve Jobs returned to Apple. And more Rita, who was the Steve Jobs of his dad Sona was in declining health and left Sony. So, it took 20 apples in 1997. To make one Sony today, I haven't checked, but my guess is it takes 20 Sony's to make one apple, I mean, so as an investor of 400 to one change, with people that are on the balance sheet themselves. Realizing today that every industry, every industry is going to be affected by technology, manufacturing has only begun to change as to what 3d printers we'll be able to print stuff and the software that allows you the program to print it when you think of an apple tree. A seed is program when you give it water and energy and light to go from seed to an apple tree. Just think of that with the software that might be written in the future. So, to me, it's always the people, people talk about great companies. It was really the people at the company that made them great. And there's no guarantee that company will be great in the future. If I was to give you an example, GE, GE was considered, if you wanted to be a manager, you'd go to GE they would learn to be a manager, more than any other conscious company in the world, but they hired from within. And then when the private equity industry grew up in 1970, if GE had a great manager, and they narrowed it down to 16, future leaders, while you would offer those 16 people equity, more equity than they'll ever get a GE more potential for wealth creation and a CEO job today, not a one in 16 chance. And so, I had mentioned to Jeff Mo, that he might be the last that when they pick their 16 or their final five. They are picking from a group of people. There were those that weren't picked by others. And so, they never fully adjusted to what happened with private equity and the chance for letting people become a CEO much earlier in their career with a wealth path and a freedom path. And so, I think what I searched for was people that had the intellect but wanted to be on a mission of job creation, funding new industries in the democratization of capital, that knowledge every morning. I am partnered with new security structures, etc. And so, they've taken it two levels. You know, you often hear a person's tell you I taught that person everything they know if I pick say mark, Rowan, and Apollo, all I might have taught him everything he knew in the 80s 90s I still stay in touch, but he's gone on. And he's taught me a few things over the years children. So, there's this famous saying also in this book, The Old Testament that a teacher Often learns more from his students than the students learn from the teacher, and I have tried to see the world through new eyes through their eyes. I would say every morning, we might do what my thoughts were, but I learned by their questioning, and they learn by my questioning from that standpoint, and that's carried forward today, 30, 40 years later.

Mo Lidsky  1:00:27

Mike, that was fantastic. I mean, we're regrettably, all out of time. I have another 20 questions I wish we had gotten to, but really, thank you for sharing your incredible insights with us and really appreciate your generosity with your time, your treasure, your wisdom, your ingenuity, and certainly hope that we can do it again soon.

Michael Milken  1:00:49

If any of your viewers have questions that we didn't get to if you would email them to me. We'll try to give them an answer.

Mo Lidsky  1:00:57

Fantastic. For everyone that joined us today, thank you so much for joining us. If you have not yet donated, please do so by going to that donate page at the top right of the site. You know, we've decided that for all the proceeds from today's session will direct them to the projects of the Milken foundation and share particularly those projects that share our mandate. And you've heard about some of the impact of those initiatives. So don't wait. Please donate today. Join us in improving health care in our communities. And Mike, thanks again for your support of Lunches with Legends™. We are so grateful for your participation. And looking forward to seeing you again soon.