The Prosperity Formula: The Man Who Predicted—and Changed—the Future of Finance, Medicine, Education and Philanthropy | Mike Milken

Harley Finkelstein (00:00:00):
So, our next guest is not only an incredible entrepreneur, an incredible builder, but someone who is so thoughtful about innovation, about disruption, but also about creating more opportunities. There was this quote that he talks about with his father that, "For someone to live a meaningful life, they have to create more opportunity for others."

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And if you track this next guest's career, you see in every aspect of what he's done, he not only built something for himself, but invited others in. In fact, at the end of the interview when we say, "Congratulations for this crazy career and everything you've done," he immediately says, "Well, I've had incredible partners." He talks about people and human capital and the importance of working with the very best people. He also has this incredible desire to get to the facts. He doesn't care about your opinion. He cares about the data.

David Segal (00:00:50):
We're talking about Mike Milken. And Mike Milken had two incredible careers. The first was in finance where he democratized finance. He created a high- yield bond, leveraged buyouts. He made it so that it wasn't about who you knew, but what you can do. He bet on people. He created industries, Ted Turner, the telecom industry. I mean, things that we take for granted today, Mike Milken spearheaded. And he does the same thing in medical research and has funded billions of dollars in education, medical research. This is a remarkable individual who has changed the world.

Harley Finkelstein (00:01:24):
He talks about at 11 years old, writing a letter to Eisenhower about him taking over at the space program, an 11- year-old having the audacity to do so. He talks about how he's built this incredible organization with the Milken Institute. He talks about philanthropy. He goes into such great detail in this stuff.

David Segal (00:01:39):
And then he gives his insights on the future. I mean, this guy can see around corners, and what he told us there was really neat.

Harley Finkelstein (00:01:44):
It was unbelievable. I mean, you said, "Tell us what we need to know for the future." And he goes into detail about five different pillars of exactly how he's thinking about the future of investing, the future of innovation, the future of entrepreneurship. Ladies and gentlemen, Mike Milken.

David Segal (00:01:58):
Let's go.

MUSIC (00:02:04):
Started from the bottom, now we're here.

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Started from the bottom, now the whole team here.

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Started from the bottom, now we're here.

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Started from the bottom, now my whole team here.

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Started from the bottom, now we're here.

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Started from the bottom, now the whole team here.

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I done kept it real from the jump.

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Living at my mama house-

Harley Finkelstein (00:02:19):
We asked you earlier [inaudible 00:02:20] marriage. And you talked about you've married-

Mike Milken (00:02:22):
56 years.

Harley Finkelstein (00:02:23):
56 years. You talked about shared values. We want to go way back to the beginning and we want to understand in your words... Is it Mike or Michael? What do you prefer?

Mike Milken (00:02:33):
Either.

Harley Finkelstein (00:02:34):
Okay.

David Segal (00:02:34):
Did you feel you were living the American dream and you had to give back to others? Is that why you did philanthropy so young in life?

Mike Milken (00:02:41):
I think the concept of everyone having a chance. And a lot of people that are successful, President Clinton said, "I feel your pain." Okay. But they understand and they see the world through other people's eyes. And I think in many ways that has been my focus my whole life.

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You try to put yourself in that other person's position, see how they're seeing the world. Something might be extremely important to you, but it's of no importance to them. And when you tell a person they have cancer, if you have a doctor tell you you have cancer, what we discovered is most people don't think about anything for the next 30 minutes. Whatever they tell you after they tell you you have cancer, you don't remember.

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And so it's often important to have another person with you. And so, seeing the people in the world through their eyes gives you a much different perspective. And at a young age, I saw that world. I was lucky enough to go to a school that was a six-year school. It was the only really school in the city that was six years. So when I was 12, I was going to school with 18 year olds.

Harley Finkelstein (00:04:09):
Wow.

Mike Milken (00:04:09):
Okay. And they had a tendency to put the 12-year olds head first into the trash cans just to initiate you when you came to school. Now I-

Harley Finkelstein (00:04:20):
Were you a big kid?

Mike Milken (00:04:21):
I was taller than I am now when I was 12.

Harley Finkelstein (00:04:25):
Okay.

David Segal (00:04:25):
Before the weight of the world was on your shoulders?

Mike Milken (00:04:27):
Yes. Before the weight of the world. No, I actually thought I was going to be a basketball player at part nine. So, in ninth grade I was all city player. So I went from center to forward to guard, to the bench, to the stands, five consecutive years. But no, I think it was very important. I've always was involved with numbers. My father had a small accounting firm. He was both a lawyer and accountant.

David Segal (00:05:00):
Not a doctor. Almost... Not bad.

Harley Finkelstein (00:05:03):
His parents would've been almost proud.

David Segal (00:05:04):
Yeah, exactly.

Mike Milken (00:05:05):
So it's interesting. He really had only one thing that his parents had given him, and that was a Bulova watch. And he paid for almost his entire year during the Depression going to the University of Wisconsin with a Bulova watch.

Harley Finkelstein (00:05:26):
Wow.

Mike Milken (00:05:27):
Now, today, maybe that's worth $ 30. And so, it gives you a relative feeling of what's happened with inflation, et cetera. But so family was always very important to us, and living modestly was important. I would say we were lower middle class to middle class at the time.

David Segal (00:05:52):
Did you feel that growing up? Did you feel lower middle class, or did you feel like you had everything you needed?

Mike Milken (00:05:57):
Well, I had the good fortune, and that's why I was saying to go to this school that ranged from very wealthy to very poor. And it gives you an interesting perspective on what people think, how they live, what's important. And I started giving speeches at a young age, et cetera, and was very entrepreneurial.

Harley Finkelstein (00:06:24):
What would you speak about?

Mike Milken (00:06:25):
Like the two of you.

Harley Finkelstein (00:06:26):
What would you speak about?

Mike Milken (00:06:27):
I spoke on many topics. Okay. Financial, what it meant to be an entrepreneur.

David Segal (00:06:35):
Wow. This is in your teens?

Mike Milken (00:06:38):
Maybe, it might have been when I was 10 or 11.

David Segal (00:06:40):
Wow.

Harley Finkelstein (00:06:43):
Hey, everyone. Big Shot is not just a passion project to us where we archive Jewish entrepreneurial history.

David Segal (00:06:49):
It's a way to fight hate speech and anti-Semitism by telling memorable stories that allow people to connect and understand one another better.

Harley Finkelstein (00:06:56):
We know stories can bring people together, and these are the stories that have never been told before. And this is a chance to see people like you've never seen them before.

David Segal (00:07:04):
Think about David Rubenstein, who started as the son of a postman that built a 400 billion business, or Issy Sharp, who started with one hotel more than 50 years ago, and today has built one of the greatest hotel chains in the world in the Four Seasons.

Harley Finkelstein (00:07:16):
Telling these stories and archiving Jewish entrepreneurial history is not just a job for two people.

David Segal (00:07:21):
We're looking for others who want to help preserve the lessons of Jewish icons.

Harley Finkelstein (00:07:25):
We're looking for people who want to help us build this archive and can be part of the Big Shot family.

David Segal (00:07:30):
If you want to be an executive producer and you want to help fund Big Shot...

Harley Finkelstein (00:07:33):
Please fill out the form below on this video.

David Segal (00:07:35):
We're chasing a dream and we're looking for others who feel the same obligation as us.

Harley Finkelstein (00:07:39):
Who feel the same passion and responsibility as we do to archive our history, to fight hate, and to bring people together. So you're doing cash flow statements, balance statements, and you're also giving speeches.

David Segal (00:07:55):
Well, wait. And your real dream is to work for NASA, right? Is space.

Harley Finkelstein (00:07:59):
So is your father giving you this confidence, this internal, "Hey, Mike, if you want to give a speech and you're 10 years old, you go ahead and do it. Hey, Mike, if you want to learn how to create a cash flow statement, here's how you do it"?

David Segal (00:08:10):
"Hey, Mike, do you want to be a 10-year-old Renaissance man?"

Harley Finkelstein (00:08:12):
Hey, did your dad do it?

David Segal (00:08:13):
[inaudible 00:08:14] give you confidence for it?

Mike Milken (00:08:14):
Well, I say my mother was more outgoing than my father. She grew up in a upper middle class family, and she went to the University of Wisconsin as a freshman. My father was finishing law school, so there was a difference of seven years. And her grandfather died when she was very young, and her father at 12 or 13 became an entrepreneur-

David Segal (00:08:47):
Wow.

Mike Milken (00:08:47):
... and took care of the family. So it's, a lot of us don't really reflect on what a family unit was like at a different point in time in history. And I often point out that the greatest achievement of humankind is probably the extension of life. One out of every two children born in 1900 died before their fifth birthday. So, when we hear about people dying early and things like that, it seems unnatural to us today. But even in the United States in 1900 one in five kids die before their fifth birthday.

David Segal (00:09:27):
We definitely want to get into that. I mean, what you've done in healthcare is incredible, but I can't help but think because Harley has two kids. I have three kids. And my 10-year-old can barely think past the next Coca-Cola that they want to drink. Here you are, saying you're a precocious kid is an understatement. It seems like you had a fairly regular middle-class American upbringing. How did you learn such a powerful lesson, like learn to see the world through other people's eyes? Was that innate to you? Was there a story there? I'm amazed that you knew that at such a young age.

Mike Milken (00:09:57):
Well, the San Fernando Valley is part of Los Angeles. More than 2 million people here. It would be a city larger than Dallas. And it was individuals who couldn't really afford to live in West Los Angeles at the time. And so, as they all moved there, you had this diaspora of individuals of aspirational families, generally strong family units that had children and wanted the best for their children. So that generation in America is often known as the most caring generation. They had lived through the Depression, they have lived through World War II.

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And I am the oldest of the baby boomers, the 1946 group. And they told their children they could be anything they wanted to be. So, it was extremely aspirational for their children. They in their lifetime were highly dependent on government, government support during the Depression, government during World War II and the wars that they had lived through. Whereas they felt that their children, and you'd be surprised of when you went and look at who was born in 1946, the first year after the war, just how entrepreneurial they are. The only year that three presidents were born in in the history of the United States is 1946.

Harley Finkelstein (00:11:38):
Wow.

David Segal (00:11:39):
Remarkable.

Mike Milken (00:11:39):
That's the only year.

David Segal (00:11:40):
Wow.

Mike Milken (00:11:40):
Clinton, Trump, and Bush were all born in 1946.

David Segal (00:11:44):
Wow.

Mike Milken (00:11:45):
But if you go through that group, the war was over. Good times were in front of us. The parents were extremely aspirational. And there are events that changed your life. For me, the first dramatic event was kind of discovering my father had polio and he never spoke about it. And we were playing football in the street.

Harley Finkelstein (00:12:13):
How old are you at that point?

Mike Milken (00:12:14):
I just don't remember. I'd say nine or 10. I just don't remember. And one of the kids says, "What's wrong with your dad? He has a limp." I never noticed he had a limp. And because it was that way from the day I remember. And I never thought, "Boy, he's never wear shorts in his life." But one of his legs had been not fully grown because he had polio, but he competed in sports and he was a good dancer, et cetera.

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But then I sat down and he talked to me about polio. So then that was my first real focus on healthcare. What was polio? Why did it happen? What occurred? It was declared an epidemic. No more than 60,000 people got polio. The country was preparing for these iron lung hotels. And you just think of a huge room that maybe had 100 iron lungs in it, keeping people alive so they could breathe. And so I guess that was my first real. The next major change is I was 11 and Sputnik went up.

Harley Finkelstein (00:13:31):
Yeah, tell us about that.

David Segal (00:13:33):
Yeah.

Mike Milken (00:13:33):
And I think the two of you are too young really to know, but the headlines in the papers were, "The world is now more afraid anytime since Pearl Harbor." And this was the middle of the Cold War. And if you could send a satellite up that goes around the earth, you could drop nuclear bombs all over the place. This led to the building of bomb shelters. It led to duck and cover drills.

David Segal (00:14:01):
Hide under your desk.

Mike Milken (00:14:02):
Right. So my first major confrontation I remember in fifth grade, was with my teacher who was trying to convince me if a nuclear bomb landed in Hesby Street School, I'd be safe under my desk and I wouldn't be safe if I didn't get under the desk if a nuclear bomb hit our school. Okay. So it took about, I don't know, three or four days when we reached a compromise that I wouldn't disrupt the class and she wouldn't try to convince me that I'd be safe under the desk if a nuclear bomb hit.

David Segal (00:14:41):
Did you know? I mean, here you are, this 10, 11, 12-year-old kid who's writing President Eisenhower to run the space program, who can do cash flows and P&L statements, he's reading the Almanac. Did you know that you weren't like the regular kids in your class? I mean, I can't imagine many kids your age-

Harley Finkelstein (00:14:59):
Are debating with their teacher whether or not hiding under the desk would be [inaudible 00:15:02]

Mike Milken (00:15:02):
No. I would say in my family, we often sat around the table at dinner and debated the current events of the day and everything. And so, it was a very worldly discussion as to how you felt. And I would say the real interesting breakthrough I had is if I did all these financial statements, and anyone whose mother or father had a small accounting firm, the whole family was engaged, that I got to visit his clients. My deal was okay, I'd go, I do all these things. I travel on a Saturday or Sunday, but I got to ask the entrepreneur a lot of questions. And I'll never forget, it was I had my first kind of shock. At the time, Sears, Roebuck was the largest retailer.

Harley Finkelstein (00:16:01):
Catalog mostly at that point?

Mike Milken (00:16:02):
No, no.

Harley Finkelstein (00:16:02):
They were [inaudible 00:16:04] at this point.

Mike Milken (00:16:03):
Physical. Physical and catalog. But physical.

David Segal (00:16:06):
Big deal for Goldman.

Mike Milken (00:16:07):
And the founder of Sears and Roebuck, a Jewish family out of Chicago where people don't know today, but he built hundreds of schools for kids in the south when it was segregated for them to go to school.

Harley Finkelstein (00:16:28):
Wow.

Mike Milken (00:16:29):
Very interesting philanthropist he was. Okay. And so his name was Harvey Cooper, and he would not sell Sears. So I'm confused here. He was selling Montgomery Ward and all these other stores, but he didn't want to sell Sears. Now the biggest. And they try to do business with him. And he explained to me that their terms are too tough. They constantly want the ability to return items that aren't sold. They don't pay on time, and they take advantage of small manufacturers. He was a small swimsuit manufacturer. And therefore, even though they're the biggest, they're not a profitable account. So it got me thinking here, "Gosh, you're going to build a successful firm and not do business-

Harley Finkelstein (00:17:18):
With the biggest.

David Segal (00:17:19):
The biggest. Yeah.

Mike Milken (00:17:20):
Right. And so, it gave me a real indication, but I think it was September of '57, Sputnik went up. And now, I'm starting to think about space and things. And-

Harley Finkelstein (00:17:33):
What was it about space that was so interesting to you? Was it multi-terrestrial, like humans being able to go elsewhere? Was it more about safety? Was it the technology?

Mike Milken (00:17:41):
Well, I had been reading comic books for a long time. Okay. And I felt I fully understood space travel. Okay.

David Segal (00:17:48):
What was your favorite comic book? I used to love comics.

Mike Milken (00:17:51):
Oh, I liked Marvel comic books, the Fantastic Four when it came out.

David Segal (00:17:59):
Captain America.

Mike Milken (00:17:59):
Et cetera. But I also Superman, et cetera. But I liked the idea that one person could substantially make a difference. So I thought, "Listen, I've never missed a math problem. I can calculate base two and base 10 in my head and go back and forth." I learned how to multiply numbers in my head. So when you say, "You're not like others," there are people that are amazing. I had competed in college, they called it knowledgeable, but I competed representing schools against other schools in different fields. Math, science, English, literature, et cetera. I was generally the math science guy and the sports guy. So if there were questions and those three, those are mine.

Harley Finkelstein (00:18:54):
Got it. And sport trivia, is that type of stuff?

Mike Milken (00:18:56):
Yeah.

Harley Finkelstein (00:18:56):
Yeah.

Mike Milken (00:18:57):
And what I discovered is they're actually human beings. If you told them a number, "What's 1,111 squared?" they see it in their mind. And that came out in a couple movies about autistic people that had these very unusual-

Harley Finkelstein (00:19:18):
John Nash, those type of things.

Mike Milken (00:19:19):
These things actually exist. But I couldn't do that, so I studied a man named Trachtenberg and others. And when he was in concentration camps, they took away his paper, they took away his pen, they took away his books. And so he devised ways to do things to keep himself busy in his head. And so, he showed you how you could multiply four digit numbers in your head faster than a calculator-

David Segal (00:19:50):
Wow.

Mike Milken (00:19:50):
... that didn't exist at the time. And so I studied all these things and made up new formulas so that if someone told me, "What's 107 times 103?" I knew it was 11,021.

David Segal (00:20:03):
Did you get that?

Harley Finkelstein (00:20:06):
Yeah.

Mike Milken (00:20:07):
Someone... You could do that.

David Segal (00:20:08):
Yeah.

Harley Finkelstein (00:20:08):
Not as quick as you.

David Segal (00:20:08):
I did. But yeah.

Harley Finkelstein (00:20:12):
But that, how does that lead to you deciding you have enough information, knowledge that you should write President Eisenhower?

Mike Milken (00:20:19):
Well, NASA didn't exist.

Harley Finkelstein (00:20:21):
Really?

Mike Milken (00:20:22):
DARPA didn't exist. And what's so interesting, people think that this is their greatest day or that this has changed the world. Sputnik going up marked the end of the Soviet Union. They thought it was their greatest day, that communism was a superior. And the US and quote, capitalism free enterprise system was inferior. But the mistake they made is they woke up the United States.

(00:20:57):
So the Soviet Union's economy was the size of maybe Virginia, Maryland, okay, and North Carolina combined. So now you woke up someone whose economy is so much larger and the country now took action. One, they made what we call today STEM education. So they made it cool to be a mathematician, a physicist, an engineer. They created programs and education to encourage you to work in this area. They created NASA and they created DARPA. So, it didn't exist. Why can't... I might as well apply. There's no one working for it. It didn't exist at the time.

(00:21:41):
So, the concept of the speed of light and Einstein and all these things intrigued me a great deal. I'm a Star Trek kid from the '60s watching that. And gosh, if you only can travel the speed of light, you can't get anywhere. Okay. You just can't get there. The nearest star to the United States is four light years. So if you could travel the speed of light, it takes four years to get there. It takes four years to send a message back. That's eight years.

(00:22:16):
Okay. Now, I do have a friend, Yuri Milner, that's building this solar sail. I don't know if you've ever visited with Yuri or not, but he's trying to find a way to travel at one fifth the speed of flight. It's going to take 20 years of development, it's going to take 20 years to get there. That's 40. It's going to take-

David Segal (00:22:37):
Four years to get it back.

Mike Milken (00:22:37):
... four years to send a signal back letting us know if this planet that looks like Earth is inhabited. I told Yuri, "I just can't wait 44 years for you. Okay. It might be too late for me." So, that I then plan my life to do that. And I-

David Segal (00:22:59):
But you still have this other... I mean, you're still involved with your dad's-

David Segal (00:23:03):
... other, I mean, you're still involved with your dad's clients. You're learning about, wow, you can have this small company that doesn't need to sell to the big players to be successful. Your eyes are opening up on business and entrepreneurship at the same time. How were the two factoring in? Was one just a side thing with your father and it was [inaudible 00:23:21] space?

Mike Milken (00:23:20):
Well, I was thinking of an entrepreneurial approach-

David Segal (00:23:24):
To space itself?

Mike Milken (00:23:25):
... to build the space program. Right.

David Segal (00:23:26):
Right.

Mike Milken (00:23:28):
So, I'd say one of the real positive things that I would encourage all young people to encourage their children is to go into debate and speech.

David Segal (00:23:39):
Yeah.

Mike Milken (00:23:40):
So the National Forensic League, I was fortunate that I was going to this six-year school rather than a three-year, what's now a middle school and a three-year high school, or a two years and three years in middle school, and then four years in high school. So, at seventh and eighth and ninth grade, I was engaged with people that were older. And I had a debate partner who was brilliant. And when we were in ninth grade, we were now debating against 12th graders. So, we learned every fact there was on the planet, on the subject. And in debate, you have to be both sides.

David Segal (00:24:21):
Right.

Mike Milken (00:24:22):
And I remember we were at a regional finals. We were the only ninth graders. Everyone else was 11 or 12. And we had a debate, and I think we won the first debate against a leading debate team in the state. And when it was over, they told us, "You guys got to get a life, okay?" I was just thinking of how obnoxious we might've been as ninth graders-

David Segal (00:24:49):
If they have to say that, right?

Mike Milken (00:24:51):
... knowing every single fact, driving them crazy when they had other things in their life going on. But it gives you a chance if you're in debate to understand all sides of an argument, how to present your ideas in a short period of time, clear. Then you get a judge who's making decision on whether you want or lost that debate. And so, I think that was a very important part of leadership.

(00:25:21):
And I think there's another thing, people that don't get to be a kid... So, Michael Jackson was a close friend of my wife and Laurie. He grew up a few blocks from me. He was just an unbelievable, caring individual. Tremendous misinformation, and everyone had took advantage of him because he was so open, and he was a great father too. But he never got to be a kid.

David Segal (00:25:53):
Yeah.

Mike Milken (00:25:54):
And so, my debate partner never got to be a kid. His father was a judge. His mom was involved with the UN. They were much later in life. Because he was so smart, he accelerated into... He was my roommate the first year when I went to Berkeley, and then he accelerated again. And so, he experienced his teenage years when he was in his 30s.

David Segal (00:26:27):
Right.

Mike Milken (00:26:28):
And so, to me, I experienced my teenage years when I was 10.

David Segal (00:26:33):
Yeah.

Mike Milken (00:26:34):
I experienced my 20s when I was a teenager. And so, if you've achieved success young, you don't really, in my opinion, need the accolades later in life.

David Segal (00:26:47):
Interesting, because you've already got them.

Mike Milken (00:26:48):
And so, therefore... So, I made a decision to go to Berkeley so I could pursue the potential to run a space program. It was the most number of people, Nobel Prizes in sciences when I went there.

Harley Finkelstein (00:27:05):
So, you were serious about the space thing. You really believed this is where you were going to spend, do your life's work?

Mike Milken (00:27:13):
Well, there's trillions of planets. And what happens if something happens to earth?

Harley Finkelstein (00:27:20):
You got to pick another.

Mike Milken (00:27:22):
In all of the millennium, billions and trillions of years of time, you would never know humans existed.

David Segal (00:27:29):
Yeah. Right. And we don't have a good plan B, even today.

Mike Milken (00:27:32):
Well, Elon Musk is working hard to give you a plan B. Okay. And I think Bezos also. And the idea is you get people off Earth, onto another planet in our source system, most likely Mars. But if something happened to our sun, then the world would change. So that's why Yuri Milner is so focused on getting into the closest star, and there's planets that look like it. But, really, to explore, it's just hard when someone tells you it's 10,000 light years. So, we don't really know what warp speed is. When they say warp 2, warp 3, what is that? But it's a lot faster than the speed of light.

Speaker X (00:28:18):
[inaudible 00:28:19]

Mike Milken (00:28:19):
Okay. So, I then changed again when the Watts riots hit here in L.A.

Speaker X (00:28:27):
That was a turning point.

Mike Milken (00:28:29):
So, I had to give up this dream because I met this young African-American man who told me no one would ever loan him money because of the color of his skin.

Speaker X (00:28:41):
Wow. Where'd you meet him?

Mike Milken (00:28:43):
The day after the Watts riots. I met him August 12th, 1965.

Speaker X (00:28:48):
Wow. You remember the date.

Mike Milken (00:28:49):
Well, I remembered because I got married on August 11th, '68. So, I would never forget what occurred that day, here. So, it was kind of the Vietnam War period. The Free Speech Movement had already started at Berkeley, which kind of changed the country.

(00:29:11):
Just as a digression., It's no accident that the free speech movement started at Berkeley because you could see the world from the corner of Telegraph and Bancroft, the American Nazi Party, American Communist Party, the very popular free love party tables were there. But it was the first year the baby boomers went to college. This 1946 group was now in college. And their parents told them, one person can change the world, you can be whatever you want to be, you weren't dependent necessarily on the government for your safety. And they're now hitting college. They're asking the same question. Why is the university publishing the school newspaper?

Harley Finkelstein (00:30:09):
Should be independent.

Mike Milken (00:30:10):
It should. The students should... I mean, why can't we do this? Why can't we do that?

Harley Finkelstein (00:30:16):
Which was new for universities. They'd never been questioned in that way. This was the first time they were getting pushback from their own-

Mike Milken (00:30:23):
Students.

Harley Finkelstein (00:30:24):
... customers.

Mike Milken (00:30:25):
Well, it's the first time the... Baby boomers, 1946 to '64, they were pampered by their parents. You wonder why did polio become an epidemic? Cancer never became an epidemic when you have millions of people diagnosed a year. But their parents, the schools changed because of the parents of the baby boomers, this group. The activist, middle, middle class parent, demanding the best opportunities for their kids, and that many of them didn't have that opportunity in life. They had to go to work. They couldn't finish high school. They joined the military at 17 or 18 years old. So, that part of their life was different. And they wanted the best for their children.

Harley Finkelstein (00:31:19):
They wanted the American dream.

Mike Milken (00:31:21):
For their children.

Harley Finkelstein (00:31:22):
For their children.

Mike Milken (00:31:22):
And were willing to sacrifice for them.

David Segal (00:31:25):
But here, this man that you meet doesn't have access, during the Watt riots, doesn't have access to the American Dream.

Mike Milken (00:31:32):
He's looking at a building that he worked at that burned down. He didn't burn it down, but he didn't stop it. He didn't do anything. He's married, has a child, and when he wakes up in the morning, is not going to have a job and has no money. And he kept telling me, and what wasn't company, he'd never have a company, he'd never have a plant, his father didn't have it. I grew up in L.A. I didn't feel any discrimination in L.A. The entertainment industry was here, all races were here. It wasn't like an eastern city in that sense, they grew up. And so, it opened my eyes, again. Yes, we had a number of African-Americans in our school, but they were more likely to be an athlete's child, an entertainer's child, etc. But it made me see the world differently and it seemed totally irrational. Why aren't you investing in a person that has ability? Why are you making the decision to invest in a person based on what they look like? Not a good way to go about it.

(00:32:48):
So, I went back to Berkeley and changed my major to business and began to study credit. I was 19 years old. I just turned 19, and I started looking at all these histories. I checked out this book, Long-Term Credit Experience by a name Bradford Hickman. And what did it show me? It showed me that the riskier things were perceived, the higher rates of return. Even during the Depression.

David Segal (00:33:24):
Wow.

Mike Milken (00:33:24):
So, in normal times, it would be a lot better. But even during the Depression.

Harley Finkelstein (00:33:30):
Still?

Mike Milken (00:33:31):
And the worst credit was sovereign debt.

David Segal (00:33:35):
Interesting. So, the debt that everybody thinks is all but guaranteed, turns out it's the high-risk debt from struggling companies that actually pays back more.

Mike Milken (00:33:44):
Well, in countries that were all rated AAA.

Harley Finkelstein (00:33:47):
Because they were countries.

David Segal (00:33:48):
Countries rated AAA pay back less than countries-

Mike Milken (00:33:51):
They default. The whole history is defaulting.

David Segal (00:33:55):
Right.

Mike Milken (00:33:55):
I mean, there's countries today that have defaulted 13 or 14 times in their history. The US, because of Alexander Hamilton was actually one of the first countries in the history of the world that didn't default. That debt was trading under 20 cents on the dollar. And Alexander Hamilton had a different strategy, created a centralized currency instead of one for every colony or every state. And he bet on the future by opening up going west if the country succeeded. And so the US did not default. It still was a terrible credit... When they inherited, it was one of the worst credits, but it never defaulted because of its potential and because of the people. But this feeling that everyone accepted, whether they're head of the Federal Reserve or head of the Treasury, everyone said, "Oh, countries are the best credit."

Harley Finkelstein (00:34:56):
And you rejected that?

Mike Milken (00:34:58):
Well, I didn't reject it. Facts and history rejected it.

David Segal (00:35:01):
And this book, it was the guy who ran the Cleveland Federal Reserve?

Mike Milken (00:35:04):
Right. And he looked at every bond issued from 1900 to 1944.

David Segal (00:35:10):
Yeah.

Mike Milken (00:35:11):
So, now I had discovered at a young age that most people have opinions, but nobody does research. One of the more exciting points in my life as a young boy at eight or nine or 10 was my parents had these bridge clubs, and once a month they were at our house. Okay. So, now I have 24 adults coming to my house that I can quiz, what do they know, etc.

(00:35:40):
So, you learn earlier, gosh, they don't know all this capitals, they don't know the longest rivers, they don't know the highest mountains. Okay. But that's just facts. What about other things? And so, in the game of bridge, one person sits out, okay, and so I got now to interact with that adult, generally for about an hour or two asking-

Harley Finkelstein (00:36:04):
Undivided attention.

Mike Milken (00:36:04):
... questions.

Harley Finkelstein (00:36:05):
Yeah.

Mike Milken (00:36:06):
And I didn't try to embarrass them by asking them what's the longest river or something, because I knew they wouldn't know that. But they didn't really know simple facts. They had one adult that still remains to me. He was like the biggest baseball fan. He was from New York, moved to L.A. So, I asked him, what has the farthest center field in baseball? Okay. It was one of the New York parks. Has no idea. So, you learn. And then when you ask people, the one that really got me when I started asking them about education and things about education, because that was one of the debate topics, and it came up later. And they just don't have a good feel, and nobody does research.

David Segal (00:37:01):
Right. Which can become your unfair advantage.

Mike Milken (00:37:04):
So, you ask a person, "Well, okay, that's interesting. Where did you learn that?" Well, someone told them, or someone told them. You can't find anyone that's actually looked at the facts. Now, today, using Google or AI, you can just go look up the facts.

Harley Finkelstein (00:37:23):
Yeah, much easier.

Mike Milken (00:37:23):
Okay.

David Segal (00:37:24):
Well, or what you think are the facts.

Mike Milken (00:37:26):
Well, if it's quantitative, not qualitative, like how many people are living, how many babies were born?

David Segal (00:37:32):
Right. Right.

Mike Milken (00:37:33):
Okay.

Harley Finkelstein (00:37:33):
How big, the biggest center field, you can actually know that quantifiably.

Mike Milken (00:37:36):
Exactly. You put that in a second, you're going to know that. So, it's different, but what I learned is it's rare that you can find the person that actually does research.

David Segal (00:37:48):
Yeah.

Harley Finkelstein (00:37:48):
So you went and got the facts on credit, and now you're at Drexel, and this concept [inaudible 00:37:55]

Mike Milken (00:37:55):
First I left Berkeley and went to work.

Harley Finkelstein (00:37:58):
Okay.

Mike Milken (00:38:00):
Then I went to work for the bluest blood firm in the country.

Harley Finkelstein (00:38:05):
And why was it important for you to work at the blue blood firm as a Jewish California?

Mike Milken (00:38:12):
Well, as a Jewish kid, I wasn't thinking about that, as a public school graduate. But the late '60s, financial firms were in serious trouble. And what was happening was interest rates were going up and you required to physically deliver the securities. So, if you bought a hundred shares of stock, the institutions would not pay until you physically delivered that certificate.

Speaker X (00:38:47):
Wow.

Mike Milken (00:38:48):
So, now these pieces of paper are flying all over. So, what did institutions discover? If I made you deliver to the First National Bank of Oregon in Portland, it doesn't exist anymore, but that was my custodian, it might take you two weeks to get it to me. So, you paid for it, now you take it down to a bank who sends in and drafts it out at this time, then it gets to the First National Bank in Oregon or New Mexico, wherever you're sending it. Now, you discover if you're really clever, that if it says you owe 13,323,000-something-and-something-and-12 cents, and 14 cents, you do something called a DK, you don't know. You now send that piece of paper back to where it came from. That takes another week or so, and then you call and try to resolve it. That takes another week.

Harley Finkelstein (00:39:57):
And you're a month in to buy-

Mike Milken (00:39:58):
Three weeks.

Harley Finkelstein (00:39:58):
Right.

David Segal (00:39:59):
So, today you buy stock instantaneously. Back then there's a three week-

Mike Milken (00:40:03):
No, no, no. You bought an instantaneously, but the buy, the bought, it doesn't pay until you deliver this piece of paper.

Speaker X (00:40:11):
Yeah.

Mike Milken (00:40:12):
Okay. So, interest expense for carrying this thing for three or four weeks now starts to exceed revenue.

David Segal (00:40:21):
Okay.

Mike Milken (00:40:21):
So, firms are failing. And so, I was a finance operations and information systems major at school. So, I agreed that I would come and solve their problem of the securities in exchange for them publishing my research.

David Segal (00:40:44):
This is at Wharton?

Mike Milken (00:40:45):
Right. I had done my credit work.

David Segal (00:40:47):
Yep.

Mike Milken (00:40:48):
And so I started as a consultant in late 1968.

David Segal (00:40:56):
At Drexel? Yeah.

Mike Milken (00:40:57):
As a consultant. I began to work on what became a central depository with others where you don't deliver anything. But I created this map that should, if you're the customer and you want me to deliver to New Mexico before you pay, I'm not doing business with you, or I'm going to charge you a higher commission. Okay. If you take delivery in New York, fine.

Harley Finkelstein (00:41:26):
Much easier.

Mike Milken (00:41:27):
So, these-

Harley Finkelstein (00:41:27):
You incentivize this efficiency.

Mike Milken (00:41:30):
Well, you took advantage of people that were getting free float-

David Segal (00:41:36):
Right, you charged for it.

Mike Milken (00:41:37):
... for two to three weeks.

David Segal (00:41:38):
Yeah.

Mike Milken (00:41:38):
Okay.

David Segal (00:41:39):
No more free float.

Mike Milken (00:41:40):
And eventually you eliminated the delivery and created a central depository. But then they could publish my work on my work on credit. And the firm was the leading... The reason I went there is they were the leading research firm at the time. But what I discovered when you went is that the highest paid people were in sales. You had fixed commission. You want to buy a million dollars worth of Shopify, it costs you 1%, $10,000. Okay. Today it might cost you 30 bucks.

David Segal (00:42:22):
Yeah. Right.

Mike Milken (00:42:24):
So the salesmen were making the money. And then I did a survey of the clients. The clients valued research the most, trading second, and sales the least. So, you had this pyramid when I came to Wall Street that I wanted to reverse, where the fundamental bottom would be research, can you at least know what you're selling and what the values are? Then, can you buy and sell it? And lastly, if you can buy and sell it or trade it, then you can try to sell it to people. So, it reversed the pyramid. When I first went to Wall Street, the number of people that were math majors or strong in math was very low.

David Segal (00:43:08):
Yeah. Right.

Mike Milken (00:43:09):
Today, I would say many of the highest compensated people in the financial industry were math majors, quant funds, other types of things. So, it's-

David Segal (00:43:21):
So, back then, the customer is paying for what they valued the least?

Mike Milken (00:43:25):
Correct. And they were paying as a fixed commission.

Speaker X (00:43:29):
Yes.

Mike Milken (00:43:30):
It's like recently that if you wanted to sell a house, it was a 6% commission. Okay. Now, it's always been negotiated if the price is higher, but the idea of a fixed commission, today, many people do it for a penny, two pennies or nothing.

Speaker X (00:43:49):
Yeah.

Mike Milken (00:43:50):
And it's very similar to what happened in the telecommunication industry. So, they had redlined, okay, it was a no-no to loan money to MCI.

Harley Finkelstein (00:44:06):
Small company at the time, though.

Mike Milken (00:44:08):
Well, you had AT&T with 99% market share. They paid the most fees of any company in the world. They had the most employees. If you financed this young upstart MCI who was going to go to fiber optics, you essentially were giving up, you were going to be blackballed.

David Segal (00:44:31):
By AT&T. Right. So, you don't get their perceived, AT&T's perceived secure debt if-

Mike Milken (00:44:36):
No. But you also don't get the fees as an investment firm-

David Segal (00:44:40):
Right.

Mike Milken (00:44:40):
... from all the money they're raising, etc, and everything they're-

David Segal (00:44:44):
Right. All the equity rounds, all the debt rounds-

Mike Milken (00:44:46):
That's correct.

David Segal (00:44:46):
... you're out if you finance our competitors.

Harley Finkelstein (00:44:49):
It doesn't sound like a meritocracy. It doesn't sound like something that is about entrepreneurship and capitalism.

David Segal (00:44:53):
It seems very un-American.

Harley Finkelstein (00:44:54):
It seems very un-American.

Mike Milken (00:44:56):
Well, or very un-Canadian.

Harley Finkelstein (00:44:58):
Or very un-Canadian.

David Segal (00:44:59):
Very un-Canadian. Yeah.

Harley Finkelstein (00:45:00):
That's exactly right. So, how did you even meet the MCI guys? How did that even happen?

Mike Milken (00:45:04):
They were a firm, they had a new idea.

Harley Finkelstein (00:45:06):
And you were taking meetings [inaudible 00:45:08]

David Segal (00:45:08):
There weren't a lot of takers for these people, right?

Mike Milken (00:45:09):
So, let's now talk about the '60s. What do you think from the normal person, the weekly salary is?

Harley Finkelstein (00:45:21):
In the '60s on Wall Street?

Mike Milken (00:45:25):
$150 a week. In the country. Now, you want to call Paris. You know what it costs for a long distance call for one minute, per minute? $12.

Harley Finkelstein (00:45:37):
Wow.

Mike Milken (00:45:39):
Okay. So, if you want to make 12 minutes of long distance calls, you've wiped out your entire gross for the week.

David Segal (00:45:47):
That's right.

Mike Milken (00:45:47):
Okay. So, it was a pretty-

Speaker X (00:45:49):
[inaudible 00:45:50]

Mike Milken (00:45:50):
... good monopoly, right? And so, I discouraged our people from calling Geneva, Zurich or other things because telecommunication costs were...

Mike Milken (00:46:03):
... other things because telecommunication costs were a big item in your business. I remember I called Ken Griffin about a year ago at Citadel, I was just interesting. Asking, "Ken, what percent of your revenue is telecommunications?" He told me it's so low, he doesn't even know, it's not an item they look at. And for young people, you can go on WhatsApp today, you pay zero to speak to anybody, right?

David Segal (00:46:31):
Talk about deflationary.

Mike Milken (00:46:32):
So, eventually I could trade the debt, I could be the major market maker in MCI debt, but we couldn't raise any money for him. And the chairman of board of the company was on Continental Telephone's board, and he...

Harley Finkelstein (00:46:49):
Does not want to mess that up.

Mike Milken (00:46:49):
Right.

Harley Finkelstein (00:46:49):
Yeah.

Mike Milken (00:46:50):
Okay. So eventually, after about three years, eventually I gave this talk gosh, AT&T has more than a million employees and MCI has 100. You're right, it doesn't seem fair. AT&T is AAA, MCI is maybe CCC, about as low as you get before you default. So I understood, but I've done all this analysis and I told them I don't really think it's fair. I think AT&T would need a million more people to compete with Bill McGowan, who was the CEO of MCI. So I told them, I think the deck is stacked in MCI's favor, and eventually they let us finance it.

David Segal (00:47:40):
This is not a quick thing, this is you started talking to MCI, trying to help them get financing for three years. Wow. And was this one of your early, big, high yield debt deals?

Mike Milken (00:47:53):
No, there were others, but in 81, I think we had the first chance... So they used to raise... If anyone in the world would give them a dime, the CEO Bill McGowan told me he spent 50% of his time raising money so he can make payroll. In 83, we did the biggest deal of all time, gave him a billion dollars, they only wanted 500, but they had to compete... So if you were AT&T, and let's say you're talking to IBM as a customer now, what are you going to tell IBM? How can you put your telecommunications network on MCI when you don't even know if they're going to be around?

David Segal (00:48:36):
[inaudible 00:48:37].

Mike Milken (00:48:37):
It's too risky. So the idea was we'd put a half a billion in cash on the balance sheet, it would sit there and every time they'd tell a client, how do you know if MCI is going to be around?

David Segal (00:48:50):
We have half a billion on the balance sheet.

Mike Milken (00:48:51):
We have extra half a billion.

David Segal (00:48:53):
But where's this money coming from? I mean, that's an absorbent amount of money back then, it's a lot of money today and way, way more then. Who are you raising this money from?

Mike Milken (00:49:02):
Good question. So I wrote down in 1965, this formula, my prosperity formula, that financial technology, FT, served as a multiplier on the world's greatest asset, human capital and social capital and real assets. And I had five goals, one, we had to be able to make a market. If I want you to buy something, you also want to sell it. If you don't think there's any way to sell something, you're not going to be an investor. So the stock market, if I wanted to buy 100 shares of IBM at nine o'clock and I changed my mind at 10, I can just go sell it. So we have to be willing to commit to make a market in these securities. And we made a market in almost 7,000.

(00:49:58):
So when I looked at Walmart, what they were trying to do, over time, we had to be a Walmart that all these things you could buy and sell. Number two, we needed to create a lot of issuers. So we needed a lot of products for sale. We had to convince you that you want to do something. 1974 was the turning point. Probably the most important financial point in history was 74 post the depression, stock market goes down 50%, business week in December has the thing, no one will ever buy a stock again.

David Segal (00:50:40):
Whoa.

Mike Milken (00:50:41):
That lets you know it was time to go in, right?

David Segal (00:50:43):
Right.

Mike Milken (00:50:43):
Okay. Interest rates double. The government puts on credit controls that you can't loan money to new customers to deal with inflation. It was the first oil shock. So two young entrepreneurs like yourself, you thought you borrowed at X, it was floating, and now they're charging you twice as much at the end of the year.

David Segal (00:51:09):
Wow.

Harley Finkelstein (00:51:09):
Right, big [inaudible 00:51:11].

Mike Milken (00:51:10):
And so you said, I'm not going to do this anymore. I'm going to sell longer term fixed rate debt, I'm going to know what the cost of my capital is. And so after that, it began a dramatic change. The other dramatic change was, yes, we needed to get issuers, so this period of time convinced the millions or thousands of businesses that they should go out and raise capital. There was only 500 companies that are investment grade. They had it good. If you can imagine my excitement, I can go after millions of companies-

David Segal (00:51:50):
That are investment grade, yeah.

Mike Milken (00:51:51):
And all the other people are focused on 500.

Harley Finkelstein (00:51:55):
Yeah, you have your pick of the litter in that case. And not just that, you actually can go deeper with the companies you like because no one else competing for these deals.

David Segal (00:52:02):
If you can get the money.

Harley Finkelstein (00:52:03):
If you can get the money.

Mike Milken (00:52:04):
So the next thing is you need to get the investors.

Harley Finkelstein (00:52:07):
Right.

Mike Milken (00:52:07):
So you asked a fantastic question, who's going to invest in your next deal? Okay. So what happened in 74, there was something called the Nifty Fifty. So these were 50 stocks you could buy. You never had a look at them again, you put them in your portfolio, you held them for the rest of your life, and you would become wealthy.

Harley Finkelstein (00:52:32):
The FANG stocks of the time.

David Segal (00:52:33):
Right, yeah.

Harley Finkelstein (00:52:33):
That's right.

Mike Milken (00:52:35):
Yeah, 50. They had an average PE multiple of 66. Now, there were some great companies in the future in there like Walmart. There were also companies like Polaroid, Avon-

David Segal (00:52:51):
Kodak, yeah.

Mike Milken (00:52:52):
Kodak, et cetera. Okay. So adjusted for inflation over 10 years, your rate of return for investing in the Nifty Fifty was minus 90%.

David Segal (00:53:06):
Wow.

Mike Milken (00:53:07):
Okay. So now a trust bank can lose 90% of my money adjusted for inflation. If you take out inflation, we're talking 30 or 40%. So why do I have my money at a trust bank? Why don't I give it to a mutual fund? Why don't I give it to another money manager? Because they can't do any worse, than the guys I gave it to for riskless investing.

David Segal (00:53:34):
Right.

Harley Finkelstein (00:53:34):
Better at losing.

Mike Milken (00:53:35):
Okay. And so this began the growth of the money managers. If you look at how little a Fidelity was then and now after this experience of 74, that world change. So when I ran around in 74 and told everyone, this is the greatest buying opportunity of all time, look what happened during the depression. Most people were skeptical.

David Segal (00:54:03):
Sure.

Mike Milken (00:54:04):
And I remember some of the major financial institutions told me, I was the head of research, do not have anyone under 30 come and talk to us because we need perspective. Now at that time, I was 26, so I told them I would not bring anyone under 30 with me. So I was 30 for like six years.

David Segal (00:54:35):
Wow.

Mike Milken (00:54:35):
And...

Harley Finkelstein (00:54:36):
And this is before venture capital, this is before any type of equity investors were coming to these great, innovative companies and offering them capital too.

Mike Milken (00:54:45):
Right. I would say this was a period of time when your established companies had access to capital. And so right after the Watts riots, I had started to read Gary Becker's work, and he wrote this piece in the 60s on why irrational behavior could be rational, why people are taking actions that don't seem to make any sense and why they're making those decisions. But I had concluded the most important element was the individual, the management, the leadership in a company. And so my view was I would be focused on who the management team is, what their ideas are, and the meek would inherit the earth, but they couldn't inherit the earth unless someone gave money.

(00:55:38):
So Bill McGowan was a force of nature. His vision for the future of telecommunications, everyone should thank him, but he needed billions of dollars and they wouldn't give it to him. And three years after we financed him, AT&T was broken up with the legal challenge, it lasted only three years. And so if you look at the period from 1970 to 2000 in America, investment grade or large companies had the same growth rate as the non-investment grade companies, up until about 76. Then the curve accelerates for non-investment grade companies, new ideas, new businesses, and it decelerates. And so more than 60 million jobs were created by new companies in the last 30 years of the 20th century and minus four by your investment grade companies. Once they had to compete now with access to capital.

David Segal (00:56:49):
Is that as because of culture?

Mike Milken (00:56:51):
What?

David Segal (00:56:51):
Is that because of culture? I mean, you talk about betting on people, it's less about who you know, but what you believe they can do. Do you think that the incumbents, when they had to compete with the smaller players who didn't previously have access to funding lost because of culture, because of the people that were running various companies?

Mike Milken (00:57:12):
There's many things that should happen in terms of can you keep a culture in a big company? Okay. Can you keep a culture as the company grows? It's difficult. So Sears, Walmart. Walmart grew not by buying companies, but by taking a concept that worked and doing it time and time again, a company like Panda Express where their founders came from, Myanmar, Taiwan, et cetera, they found something that works and they did it time and time again, and so they duplicated that effort. It's not unusual that you have outsiders change things. If you looked at the entertainment industry and went back in time as to who made movies, who were your entertainment companies that grew up? Every single person that founded them was an outsider. The person that founded Fox, the person that founded Warner, the person that founded Columbia, the person that founded Universal, MGM. One of the interesting things, if you go back in history is it appears every founder live within 200 miles of Warsaw.

David Segal (00:58:37):
Wow.

Mike Milken (00:58:38):
So you had this-

Harley Finkelstein (00:58:41):
You're talking about Poland?

David Segal (00:58:41):
Yes.

Mike Milken (00:58:42):
Yeah.

David Segal (00:58:42):
Wow. All Jewish.

Harley Finkelstein (00:58:43):
Every founder of every major studio you just mentioned...

Mike Milken (00:58:46):
Lived within-

Harley Finkelstein (00:58:47):
Live within 200...

Mike Milken (00:58:48):
And almost all of them were Jewish. So they were outsiders, they came here, they were an establishment, and they made films and stories in many cases of hope, think during the Depression of hope. Yes, you made movies like Gone With the Wind and a Realization, but you wanted people to believe there were hope, whether it was those musicals and dancing and everything, they were singing in the rain, and you start to think what was coming on. And it's so interesting, you had a culture, now you had challenges. So at the same time you had those, you had three television networks, CBS, NBC, and ABC. The government consent degrees broke up the movie companies first that they couldn't own the theaters. So if they owned all the theaters, no competitor could get their movies theoretically or had to ask for permission-

Harley Finkelstein (00:59:54):
Although today we'd call that vertical integration.

Mike Milken (00:59:56):
Yes.

Harley Finkelstein (00:59:56):
But at that point it was non-competitive.

Mike Milken (00:59:58):
And for the three networks, they passed a regulation that you couldn't own the content and the distribution, so they separated. So CBS, its content moved to a company called Viacom. Later they were put back together. So these were outsiders, they were entrepreneurs, et cetera. And...

Harley Finkelstein (01:00:22):
Has that been your view after an incredible career that the people that tend to build the most ambitious things, the most innovative, disruptive things, tend not to come from inside those industries with the baggage that comes with it, but rather they are tourists to those industries?

Mike Milken (01:00:41):
That's one. It's something to be as the two of you know an entrepreneur, a founder, it's different. The stock market crash of 1987, when it went down 20%-

Harley Finkelstein (01:00:55):
That was Black Friday?

Mike Milken (01:00:55):
Yeah.

David Segal (01:00:56):
Yeah.

Mike Milken (01:00:57):
So that's the only month in my entire life we ever lost money. Well, we lost a little money. At two in the morning, everyone that was at their desk and two in the morning at work with us, whether they're in Australia, Europe, Asia, wherever it was, we're the entrepreneurs, they weren't the employees. Trying to figure out, okay, what are we going to do tomorrow? I've had many CEOs come, I remember one one running an airline came and he had a strategy. And I said to him, "Well, what happens if that strategy doesn't work?" And he says to me, "The die is cast, this is our plan. If it doesn't work, we'll be out of business." I didn't finance that company.

Harley Finkelstein (01:01:51):
Of course.

David Segal (01:01:52):
Interesting. Because no ability for self-discovery and to readjust.

Mike Milken (01:01:56):
Well, you know as entrepreneurs the world, you think it's going to be something changes and you have to adjust to it. And if you're not flexible or you don't see the change, so going back to your question of what happened and where did the investors come from, they came from those that understood number one, even though they didn't believe when I visited them in 74, by 1976, you made 100% on your money owning straight debt, no leverage, in two years. So yes, the ideas stood the test of time.

(01:02:37):
There's a famous professor that was on a panel with me in 74 who had predicted that 700 of the 2000 largest companies in America were going to file for bankruptcy. I gave a talk and said, "Well, if you look at the depression out of those 700, you'll be lucky if 1% filed for bankruptcy." New York State debt was at 20 cents on the dollar, in New York City and so on. But if you looked at all history, you would find the best credit were organizations, then you have individuals, and the worst was government. So it was exactly the reverse, but they didn't necessarily believe when you told them that, they had a much stronger belief when they missed out in doubling their money in two years. And the failure of the Nifty Fifty invested created the people willing to invest. So now the market was there, the issuers were there because of what occurred, and now the investors were there.

Harley Finkelstein (01:03:45):
And that created the perfect opportunity.

David Segal (01:03:46):
Mike, you said, great investors are social scientists. I thought that was interesting, not scientists, not journalists. Why social scientists?

Mike Milken (01:03:57):
If you go to business school, what do they teach the kids? First, they teach them about regression analysis. What is the risk of regression analysis? It's based on the past.

Harley Finkelstein (01:04:09):
It assumes things continue.

Mike Milken (01:04:11):
Right. It assumes the future will be like the past. Well, with new technologies, computers a million times faster, data storage costs one billionth, the future's not going to be like the past. So that's the first problem you have. Second, people change. When you tell me it's a great company, I say to you, it's a great company because of the people that work for that company. We'll see in the future whether it's a great company. So let's talk about a question you would ask... And I just want to finish, you study the company, you study the industry, you study capital markets, and you learn the best time to raise money is when you don't need it, and the worst time to raise money is when you need it. And lastly, you study the economy. Those are the four things that when you go to school, you study.

(01:05:06):
What you don't study is regulation. You can pass regulation that will put any company out of business tomorrow, whatever that regulation wants to be. In the case of MCI and AT&T, AT&T introduced regulation every month that would make it impossible for them to pay the switching fees to get onto AT& T network. So they couldn't handle the costs. But you can think of all kinds of regulations today related to energy and other things that make things uneconomic. And then the most important element is society. How does society feel? Is what you're doing beneficial to society or not beneficial to society? Because if society feels what you're doing is not beneficial, regulation will follow. And it sometimes takes a long time, let's talk about cigarettes.

(01:06:07):
The first inclination, or the first indication I should say, was about 1939, that there's a link between lung cancer and cigarettes, and it might not be good for you to be smoking. Now, the cigarette companies were fantastic marketers. Almost everybody endorsed cigarettes. Number one, doctors. They even had babies in cigarettes, the Flintstones had cigarette ads. I mean, you name it, baseball players and you name it, whoever it was. And so things were changing over time. In the 1980s, the most valuable brand in the world was still Marlboro.

David Segal (01:06:57):
Wow.

Mike Milken (01:06:57):
Okay. But then something happened, there was a change. They made documentaries, things were released. And eventually the largest cigarette... In 1989, at one point, the most valuable company in the world was Philip Morris, at one point in time. But society, it turned, and Altria is no longer the most valuable company in the world, and taxes were put on, et cetera. So society responds, and financial markets often have a good solution. If you looked at the 1980s sulfur dioxide, SO2 in the air, these clouds hung over the industrial part of the country, Indiana, Ohio, Pennsylvania, et cetera. And movies, we're all going to die of acid rain.

David Segal (01:07:56):
Acid rain, right.

Mike Milken (01:07:56):
Okay, so what happened? You use financial markets. And one of my partners, the government created regulation that you had to reduce your SO2 emissions. If you couldn't, you had to go buy these credits. If you could reduce it more, you got credits. It actually became economic to buy a plant that was a huge emitter of SO2 and shut it down because the credits were worth more, and so in 15 years it was over. You created financial markets that eliminated SO2 by creating incentives teamed up with government regulation.

Harley Finkelstein (01:08:42):
The greatest strategy is an economic strategy, but I think to your point where you marry social, human nature and also a problem to solve, and you use money to actually decide that and strategize around it, you actually get massive results.

Mike Milken (01:08:57):
So if you look at a person in the news today, like Elon Musk.

Mike Milken (01:09:01):
... news today, like Elon Musk. I did an interview with him this year, to try to outline, what was he thinking when he was in school? So I was thinking, access to capital. I was thrust into medical research because of family, et cetera. And what was he thinking about? He was thinking about educating everyone on the planet and leveling the playing field.

(01:09:32):
So Starlink, every single person could have access to knowledge and education wherever they are in the world once someone built a system to access. He was thinking, "Oh, we better get human beings off planet earth just as a hedge in case something ever happens. Okay, SpaceX."

(01:09:56):
So he was thinking, "Boy, the solution is electric cars and we'll figure out how to power the power plants that create the power." So there's a link between his actions and what kind of a path he's gone on after he and Jeff Skoll and everyone got together on PayPal together. But if you talk to Jeff, he will be telling you that Elon was talking about all these things ...

Harley Finkelstein (01:10:24):
Way back then.

Mike Milken (01:10:26):
So he is executing on a vision that he had. And society was behind him on the electric car, so the government wanted that.

Harley Finkelstein (01:10:37):
Yeah, which made it easier.

Mike Milken (01:10:39):
Private industry substantially reduces the cost of space. It's still very expensive. I went over to Jet Propulsion Laboratory for the simulated landing of the Mars Rovers with my good friend David Baltimore. Let's see, Schwarzenegger was there, Gore was there, and I took two of my sons.

(01:11:05):
And so what was it all about? They had a person from private industry manage it, and you broke it into teams. One teams was what goes in the rover. Lot of arguments. "I want this experiment. You want that experiment. We only can have so much weight. What are we going to do if it gets there?" So that's the first team.

(01:11:27):
Now they have to get it off earth into orbit. That's the second team. Now, the next team takes it out of earth orbit and had to get it to Mars, and Mars orbit. Now the next team has to get out of Mars orbit onto the planet. And so you had a systems and engineering challenge with different groups.

(01:11:50):
And so I remember that day, the cheering as each event occurred, each group cheering. So it's my belief that the free enterprise industry has been the greatest vehicle for us to achieve what we've achieved, and entrepreneurs like the two of you. But you needed financial, access to financial capital to make your dreams come true, and then you make your dreams come through for everyone.

David Segal (01:12:23):
Well, you certainly did that. I mean, over $250 billion of leveraged buyouts. I think 60% of the entire junk bond market went through you at one point in time.

Mike Milken (01:12:34):
Well, yeah. There were plenty of competitors, but I would say what was our secret sauce? Research focused on the management team. It's not on the balance sheet. There's only one industry that puts people on the balance sheet is sports. You put your player contracts on the balance sheet.

David Segal (01:12:54):
Yeah. Interesting.

Harley Finkelstein (01:12:57):
Let me sort of close with this because we want to be respectful of your time and we're getting the hand waves now.

Mike Milken (01:13:02):
Well, you can edit whatever you-

Harley Finkelstein (01:13:04):
Oh, that's good. Well, I will say this, David and I did a ton of research on you, Mike, for this interview. We went through your stories, your family, the businesses, the impact you've had on the world.

(01:13:15):
On the way over here today, there was this one quote that David and I kept going back to. I'm going to read it to you. It's a quote, I think from your father, which was, "No one could have a truly meaningful life unless everyone has a chance." And one of the common threads across all these stories, all things you've done is you've given people a chance that otherwise would not have had the chance.

(01:13:38):
And I think the reason you're able to speak with such passion and conviction about the meaning that these things have given you is because you haven't just democratized capital or lending, you've democratized opportunity. And I don't know if that's what you consider to be your legacy, but as two entrepreneurs ourselves, what David and I admire most about you is what you've done in that way. You have given more people a chance and that's created incredible meaning for you.

Mike Milken (01:14:06):
So yesterday, I taught math and entrepreneurship at the very catchy school called Milken High. Okay? And so there's this saying, "You learn more from your students." So I go and teach young people to see what they're thinking. I give them super mathematical powers so that they understand the importance of math. But I also really focus on what's important in life, that they're focused on that and whether someone send them or defriended them on Facebook is not a big deal in this game of history.

(01:14:54):
And I think the thing that shocked me the most is that people don't really realize that the number one driver of the world's economy is health and medical research. It's really, they don't think about it today, but if you look at the entire history of the last 11,000 years of human development, there are periods for a thousand years there are almost no increase in population, no increase in per capita income. And then something happened in the last couple of hundred years.

(01:15:33):
And it's easy to see by telling you, you've had more than a doubling of life expectancy. You know, when life expectancy on the planet, the start of the 20th century was 31 years of age. Just think, neither of you would be here today, right, if you were that? And in this country, it was 50.

David Segal (01:15:54):
Well, I mean, we didn't even get into this, but what you've done for medical research is nothing short of astounding. I mean, nowadays biohacking, the idea of you are what you eat, gut microbiome are-

Harley Finkelstein (01:16:06):
It's common now.

David Segal (01:16:07):
... such big concepts, but I don't think our listeners truly appreciate that you were the spark that lit all those fires.

Mike Milken (01:16:16):
If you went to the National Cancer Institute in 1993, the people they hated the most were first, cigarette manufacturers and second, people promising false hope, like what you ate had an effect on your cancer. And in '94, I put on our annual scientific retreat and I wanted to bring a man named David Heber to speak, founder of the Center for Human Nutrition, PhD, MD. And they told me, "We would lose all credibility if we're starting to talk now about microbiome and nutrition, soft science."

Harley Finkelstein (01:17:04):
Soft science is what they called it.

Mike Milken (01:17:06):
We reached an agreement that as long as he wasn't on the program, so people that got the program didn't know, and he would only speak at lunch when people didn't have to necessarily listen, he could be on the program.

(01:17:21):
25 years later, 2019, I'm going to our scientific retreat which consists of maybe 800 of the world's leading scientists in the medical area, mathematicians, computer scientists, physicists. And I'm looking at the program, almost a quarter of the program, 20 to 25% of the program is your microbiome in cancer, your microbiome in health. Can you reverse disease by the microbiome?

(01:17:55):
And so thanks to technology and sequencing today, we know if I don't change your genes, but your children or your children's children will have their genes adjusted using CRISPR technology to eliminate certain diseases, but I can change how they're expressed by changing my microbiome. And so it's 24 years, 25 years later, and there's a whole different view today.

(01:18:26):
And there are numerous biotech companies today and others focused, and if maybe I can even slow down and reverse Alzheimer's, Parkinson's, not just cancer by adjusting your microbiome. So science and research has come to the fore.

(01:18:45):
So my life, I would say is someone of a bookend today. Yes, I had the honor of financing 3,000 companies, and it'd be hard for people to believe today that the hardest industry to finance it all, by far was mobile cellular. No one believed. Even the founder of the technology didn't believe in it, AT&T, okay? Even they didn't believe and people didn't understand, "I have a telephone. Why do I need that?" But I said, "I was a Star Trek kid, and the communication device is where you were." Captain Kirk's device was here, told some Scotty to beam him up.

Harley Finkelstein (01:19:28):
Right.

David Segal (01:19:28):
Mike, Harley and I were talking about this on the way over. I mean, your ability to see around corners has been nothing short of remarkable. For the young Mike Milken listening to this now, what are you seeing today? What do you see ahead of us?

Mike Milken (01:19:42):
Well first, I want to stress, it's the people. Okay? You can have dreams, but someone has to make them a reality. So Steve Jobs founded Apple. They forced him out of the company he founded. In 1997, he was on the verge of bankruptcy. What many people don't know is that one of the reasons it didn't go bankrupt is Microsoft loaned him money. Now you say, "Why would Microsoft loan Apple money?" Do you know?

David Segal (01:20:23):
No.

Mike Milken (01:20:25):
Microsoft was under a regulatory review for monopolizing software. There was one company that had its own software systems named Apple. They needed Apple to survive, to exist.

David Segal (01:20:39):
Wow.

Mike Milken (01:20:40):
Now, if you went back in history you can ask yourself, "Why does Microsoft exist?" Well, IBM was under scrutiny as a monopoly.

David Segal (01:20:51):
Right.

Mike Milken (01:20:51):
So they couldn't own the software and the hardware. They made a mistake, not understanding it was the software that was valuable, not necessarily the hardware. But if the movie, The Matrix had come out a few decades earlier, maybe they would've seen that the machines and the humans had to team up to fight the software to win.

(01:21:14):
So there's a lot of things in history, but the underlying factor is I had this idea on mobile, but it took Craig McCaw and John Stanton and Rufus Lumry and that whole group, Wayne Perry to make it a reality. I had a belief in adult Disneylands, but it took Steve Wynn to make that a reality.

David Segal (01:21:43):
Whom you financed, along with Ted Turner and a host of other-

Mike Milken (01:21:48):
Ted Turner had an idea of a station, of an all-news 24-hour station, but of a superstation that everyone could get access to. But then you needed someone like John Malone to help build the cable industry at the time. So you can have great ideas, but unless you have great people. And maybe one of the lessons to be learned is you need to be able to change. So, what company for decades was, if you wanted to become a great manager, who would you go to work for, to learn?

David Segal (01:22:27):
McDonald's?

Harley Finkelstein (01:22:29):
McKinsey, BCG?

Mike Milken (01:22:30):
GE.

Harley Finkelstein (01:22:31):
GE, right. Jack Welch.

Mike Milken (01:22:32):
Okay? So, GE and before him, Reginald Jones. All right? So what did they do? They went on and built a team of people, and they identified who they thought were the 32 future leaders. And they monitor them and they moved them around and they ran different divisions. And as a big company, they gave you a chance to run multi-billion-dollar businesses. Then they narrowed it to 16, then they narrowed it to five. And they pick one, and the other four left and ran other companies.

(01:23:09):
Okay. What happened? What didn't they adjust to? They didn't adjust to the growth of private equity, which is the other one of two pieces in the puzzle. Yes, you had to start trading. You needed issuers, you needed investors, but you needed to securitize so that you weren't buying an individual and you could buy a hundred different things.

(01:23:39):
First major thing was the securitization of mortgages than auto loans. So people today can get a lower rate on their mortgage than if it was just them because you're one of a thousand or a million in a package, and it's hard to discriminate when you don't even know who the people are that you own their mortgages. Okay?

(01:24:02):
And lastly, you needed to combine ownership and management. So as I came in, in the '60s, I discovered that the utility curve of the owners was often not in the best interest or the utility curve of the shareholders. So, a whole industry grew up private equity. And we started to finance, where the owner picked the management and the management was focused on the owner.

(01:24:33):
And today, there's more than 30,000 companies controlled by what you would call their private equity funds. And there's more large companies in the U.S. now that are owned by private equity-controlled than our public today. So you had to link that management, but the key is the manager.

(01:24:55):
So let's look what happened at GE. There was Jack Welch and then there was a new team that came on. And I visited with a new member when he was picked, the first one and told him that he would be the last one because of private equity. If you're one of those 32 and you've already run a billion-dollar company and you are a private equity or you're an owner, you're going to go recruit them. And what are you saying to them? You're saying to them, "I'm giving you equity."

David Segal (01:25:29):
That you get ownership.

Mike Milken (01:25:30):
" You're going to be the CEO. Right now, you're only one to 32."

David Segal (01:25:32):
You're a partner.

Harley Finkelstein (01:25:32):
You're a partner.

Mike Milken (01:25:32):
Okay? Now you're down to 16. Now, many of who would've been the 16 are gone. Now you're in the 16, you're now running even a bigger business. And the number one recruiting area then in that point in time is, "Let's go look at who's running these businesses and we're going to hire them to be our CEO." So by the time you get down to the five, all you have left is the rejects, right?

David Segal (01:26:03):
Right.

Mike Milken (01:26:04):
The people that no one ... So you were the leading trainer of managers, but everyone came to your university to recruit. Let's talk about family businesses. The son or the daughter inherits from the parents, then the grandchildren inherit, and then the great-grandchildren.

(01:26:37):
90-some-odd percent, 96% of all companies are gone by the time you hit ... So if you decided, "Okay, who's the most talented person to run this business or build this business?" If you're limited to just your immediate relatives, that's a pretty small pick, right?

Harley Finkelstein (01:27:01):
Definitely.

Mike Milken (01:27:02):
Okay? And so you do that for a couple of generations, it's hard. If you've been really successful, do your grandchildren have the same drive that you had? Maybe not.

Harley Finkelstein (01:27:14):
Unlikely.

Mike Milken (01:27:15):
They might be flown on a private plane and you never flew on a private plane.

Harley Finkelstein (01:27:20):
Maybe never been on a plane.

Mike Milken (01:27:21):
Okay? So it's very hard to pass on that energy from one generation to another. And as we protect our children, it becomes harder to pass on because you learn so much. What has made the United States and maybe Canada to a certain degree, different than all other countries in the world, has been you've had a chance you could fail and you get another chance? I never wanted to hire a trader that hadn't lost their shirt on a trade, because I know I was going to get destroyed, because they learned substantially more.

(01:28:05):
You know, not everyone's first company works out, but they learn so much from one that didn't. And so I particularly like to find that entrepreneur that's a serial entrepreneur, that's not only had success, but that's had a failure, because if you only had success in your life, we don't know how you're going to act when something goes wrong.

David Segal (01:28:33):
You got to shake it off and get back in the game?

Mike Milken (01:28:34):
Yeah. So I'd say, bookends for me, my father talking to me about everyone having a chance. And for the last 11 plus years, we've been building the center for advancing this dream.

Harley Finkelstein (01:28:49):
And this will be in D.C.?

Mike Milken (01:28:50):
D.C., across from The White House and the Treasury.

Harley Finkelstein (01:28:53):
I assume that was very specific in particular. You wanted it there?

Mike Milken (01:28:56):
Well, I had an idea of Malibu. I bought all this land in Malibu, but then they told me we couldn't have more than 200 people visit a day. They don't want any traffic. But a chance to buy the old Riggs Bank building, which had the safety deposit boxes for every single president in them after Lincoln, but across from The White House and the Treasury. Hopefully, this will be a beacon of hope that every single person can find someone like them.

David Segal (01:29:28):
This is a big project for you. About half a billion dollars is going into this?

Mike Milken (01:29:32):
Well, our original budget was a few hundred million. Our current budget is over a billion. So yes, it's a big project, but my goal is that my grandchildren will grow up in a country that still believes in financial literacy, believes in economic independence, believes in medical research, believes in the entrepreneur and innovation, and believes in the importance of the educator.

(01:29:59):
So we're filming 10,000 people, their stories. If you grew up and didn't know who your father was, we got plenty of stories for you of people that didn't know who their father was, or who lived in a homeless shelter, or lived in foster care, or came from a hundred different countries in the world to come here.

Harley Finkelstein (01:30:23):
In many ways, what we're trying to do with Big Shot, with this project is to tell stories of people who are unlikely to have been successful because of their background, because of where they come from, these stories of perseverance and chutzpah and audacity, and specifically for Jewish entrepreneurs.

(01:30:38):
But let me sort of cast a wider net here as we finish up. I want to say on behalf of, frankly every entrepreneur on the planet, Mike, thank you for everything you're doing. Thank you for everything you've done. Thank you for giving more people an opportunity to find their own versions of success. In some cases, that may have been they wanted to build a $100 billion company. In other cases it may have been, they just want to put food on their table.

Mike Milken (01:31:01):
Or to coach a Little League team.

Harley Finkelstein (01:31:04):
Or coach a Little League team, and be able to do that. And David and I, we pray at the altars of entrepreneurship, but you are truly one of the best we've ever encountered and we're so grateful you gave us your time today.

Mike Milken (01:31:18):
Well, number one, thank you. I've had-

David Segal (01:31:20):
So much, Mike.

Mike Milken (01:31:21):
... thousands of partners along the way, many of who you've interviewed or are going to interview along the way.

Harley Finkelstein (01:31:29):
Appreciate that. Thank you.

David Segal (01:31:29):
This has been incredible. Thank you so much.

Mike Milken (01:31:31):
Thank you.

MUSIC (01:31:32):
Now the whole team here.

(01:31:33):
Started from the bottom, now we're here.

(01:31:36):
Started from the bottom, now my whole team ...