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Michael Milken’s (Chairman, Milken Institute) Farawell Address

February 4, 2010

Addressing Global Challenges

Russia has great opportunities to learn from the successes and mistakes of others. In particular, investment in human capital was cited as a factor of successful nations. As an example, the case of Jamaica and Singapore was cited. The two countries gained their independence from Great Britain at about the same time. Their populations were similar and per capita income for both in 1960 was about $2,200. BY 2009, per capita income for Singapore was about $38,000, while that in Jamaica was about $5,300. Investment in education and training had paid off.

Capital structure, an area Mr Milken has studied for 45 years, was also discussed. The conclusion was that more equity and less debt for riskier ventures bore fruit. The understanding of credit versus leverage cannot be underestimated. Returns should be based on favorable margins and not overleveraging low-margin projects. Mortgages for various countries as a percentage of GDP showed at only at 2%. To Mr Milken, developing a sound mortgage market in Russia based on an understanding of credit – and not leverage – was an opportunity that must be addressed.

As he stated at another panel earlier the day, history forgets defaults. Capital comes back after a few years and at greater levels. Argentina is a prime example. So focus on the future – capital does.

Returning to human capital, it was pointed out that 55% of middle-class families in China send their children to after-school English lessons. Only 2% of middle-class budgets in the US are devoted to education (cars and housing dominate), while that number is 15% in Asia. Health is an important issue, with life expectancy rising from 31 in 1900 to 68 in 2009. Numbers on obesity in the world show the US with highest proportion: 37% of men and 42% of women are medically obese. Hence, the opportunity exists for Russia to boost efforts in health and education.

Mr Milken closed his remarks quoting Chekhov: “Knowledge is of no value unless you put it into practice”.


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