Sponsors

Participants at this session will receive an update on the multifaceted economic and other contributions of the biopharmaceutical industry to California. This interactive discussion will focus on current and future developments in the state. The modern biotechnology industry was created out of California′s universities in the 1970s. Many pharmaceutical firms looking to stay abreast of the latest therapeutic developments matched up with biotech firms seeking external resources, additional expertise, the ability to scale-up production and global marketing capabilities. A pattern of increasing interdependence developed, and nowhere is that relationship more embedded than in California. The biopharmaceutical industry is a significant force in the state′s economy. Several of the world′s leading clusters are in California. Gain firsthand information on the extent the industry′s role in the state′s economy in terms of jobs, earnings, output and the products that are delivered to improve health and the quality of life to residents. Find out how the state is positioned for future growth in this industry.

Preregistration for this session is required. Please send your requests to Joe Meehan at jmeehan@milkeninstitute.org.

Moderator:
Carl Geppert, Partner, Americas Communications and Media Practice, KPMG LLP

Technology isn't just changing the media business landscape. It is dramatically, fundamentally changing the way consumers consume media. Increasingly, they want it on demand. They want just what they want. They want to control it. They want choice. This change, and the market fragmentation that accompanies it, creates new challenges for marketers. How do they market new products? How do they reach consumers when consumers have so much more control over when and how they will receive marketing pitches? How do firms build their brand?

Moderator:
Ross DeVol, Director, Regional Economics, Milken Institute

While there is disagreement about the how the relationship between universities and the business sector is evolving, more corporations are looking to gain a competitive advantage by using university research.

The relationship change makes sense, according to Arthur Carty, the national science advisor to the Canadian prime minister, because it gives firms access to the best and the brightest people, opens a window to cutting-edge research and allows firms to cut back on their own R&D costs. However, Kevin Cullen of the University of Glasgow disagreed. While acknowledging that even Lord Byron, who wrote over a hundred years ago, knew that a university′s role was to create and disseminate information, the change today was in people's expectations from research institutions.

Regardless of their viewpoints, as the role of universities in R&D change, there is a need to bridge the cultural gap between academia, governments and private industry. Key roadblocks to the university-industry interactions are cultural and motivational differences.

Cullen believes there are two types of research. The first type is "outreach," where the universities disseminate research for the public good without any expectation for money back. The second is outcome-based research, which takes the research to the marketplace.

Cullin estimates that as little as 5 percent of university research has any value in the marketplace. Since the majority of university research is not viable for the private sector, universities use a different measure of success: the impact on society. This measure obviously conflicts with the way business measures its success. Therefore, John Fraser of the Association of University Technology Managers, noted that universities cannot be the key innovators in the economy, but rather key players.

Speaking for the business sector, Wayne Johnson of Hewlett-Packard Co. noted that most companies do not know how to approach the relationship. And universities are fearful that they will not retain the intellectual property rights for their ideas. Instead, he said, universities and firms must look to build a relationship of trust through information sharing.

Because negotiations for the sharing of information with U.S. universities have been time-consuming and often difficult, many firms are now looking to foreign universities, where negotiating is less cumbersome.

Fraser noted that his section of the university, the Offices Technical Transfer (OTT) division, is generally looked upon as the "bottleneck of the process" between researchers and business. There are problems in the system, he acknowledged, adding that a detailed assessment of the "knowledge chain management" would be helpful so that OTTs can become more efficient.

Lesa Mitchell of The Ewing Marion Kauffman Foundation noted that one way to assist in this process is for universities to encourage faculty entrepreneurship by hosting sessions between the business industry and the community, and perhaps evaluating professor′s success beyond the number his or her publications.

Carty noted that government can be a catalyst for the movement of research into the universities by creating an environment and incentive for the small business spin-offs around universities. In the end, all the panelist agreed that the structure of the relationship must be improved in order to improve the efficiency between government, business and universities.

Moderator:
Wes Nichols, Co-Founder, Managing Partner, MarketShare Partners

Few areas of business are changing as quickly as marketing. Shareholders are pressuring corporations and their CEOs to deliver against short-term profit and revenue objectives. Couple this with the greatest disruption in the history of advertising and marketing: massive changes in the way consumers receive - and react to - messages (TiVo, iPod, satellite radio, etc.). CEOs are unsure of the returns from marketing, which has acquired a reputation as a "spend" function rather than a "save and make" function. Join us as we debate what the right mix is between a fact-based understanding of performance and the artistry of successfully launching brands. The same technological advancements driving media change have also created tools that help take decision making from instinct to certainty. But many great marketers still make choices based solely on experience and intuition. Join us as we debate the best ways to connect marketing, sales and incentive activities to cash flow.

Moderator:
John Shegerian, Managing Partner, President and CEO, Electronic Recyclers LLC

"E-waste -— it′s here, and it′s real," John Shegerian of Electronic Recyclers LLC said, kick-starting the environmentally relevant roundtable session. Last year California's estimated total of legacy electronic waste surpassed the 500 million-pound mark; this year, the state is looking at 10 million pounds of new electronic waste being introduced each month. Shegerian called this the environmental "tipping point" and spoke passionately about the need for action.

Shegerian passed the discussion to Jeff Hunts of the Waste Recycling Program. Hunts, who has been active in E-waste reform, explained the evolution of California's SB-20/50, an incentivised fee program designed to encourage electronic recycling while it creates a statewide fund to cover transportation and processing costs. This program is the nation's first in the electronic field and resulted in $70 million in fee-based state revenues and $30 million of incentive claim payments. The greatest success was in the 70 million pounds of recycled E-waste recovered by the program; Hunts estimates that this will double to 140 million pounds at the end of this year.

The original SB-20 was unique in its fee-based incentive structure, which mimics bottle recycling fees in Maine and Washington. Hunts suggested that problems in execution with these programs have to do with government administration rather than intrinsic flaws. This turned the conversation to a discussion of the ideal regulatory and administrative structure. David Thompson of Panasonic continued the thought by explaining how his company deals with E-waste on the corporate and home consumer levels: Large businesses are cooperative, but private users rarely are willing to take the initiative to recycle electronic waste because of the costs involved. Similar comments around the table provided support for SB-20's fee based structure, possibly with administration driven by a third-party foundation.

Bill Shireman of The Future 500 supported that opinion and then addressed the state′s electronic recycling infrastructure. He suggested that E-waste problems were rooted in the lack of an appropriate infrastructure to make home users' recycling goals plausible; right now, the effort required and lack of an incentive doesn′t make recycling worth the trouble.

The panel as a whole addressed China and India, both of which are producing electronic waste at an alarming rate. Shireman pointed out China′s potential as a secondary market for recovered American electronic waste but agreed that the growing country′s own waste is an increasingly relevant environmental hazard.

Shegerian closed with passion similar to that of his opening, challenging the roundtable to answer the environment's call. He invited all who care for the environment to support efforts to safely dispose of and recycle electronic waste.

Moderator:
William Haseltine, President, Haseltine Associates Ltd.; former CEO, Human Genome Sciences

Join pharmaceutical company executives and medical research experts in a roundtable discussion that will explore new external, collaborative research models that could lead to an increase in the number of new drugs to help treat and cure the most deadly and debilitating diseases. What can the pharmaceutical industry do to spur innovation and fill the pipeline?

Introduction By:
Leonard Nimoy, Actor, Director, Photographer, Author

Moderator:
Daniel Goldin, Chairman and CEO, The Intellisis Corp.; former Administrator, NASA

When will I visit outer space? That is the question posed by former NASA administrator and current CEO of Intellisis Corp. Daniel Goldin to a panel of former astronauts and space travel leaders. Following an introduction by Leonard Nimoy, Goldin was joined onstage by Eric Anderson of Space Adventures Ltd.; Peter Diamandis of the X Prize Foundation; Firouz Naderi of the Jet Propulsion Laboratory; and Leroy Chiao, a former NASA astronaut.

When will a mass market develop for the type of recreational space travel currently available only to those who can afford the $20 million price tag? Currently, several organizations offer space trips to consumers, with offerings ranging from a few moments of weightlessness to trips into orbit.

What about government's role in the effort? Anderson and Diamandis contended that the government's main responsibility in the development of space travel is to stay out of the way of commercial enterprises in this pursuit, and to offer incentives for further private company developments. Naderi provided another perspective, advocating a role for government, particularly in the areas of defense (including from asteroids).

Regardless of the role government may play, the panel agreed that the opportunities for space exploration are poised to increase dramatically. Whether mining asteroids, engaging in space tourism or searching for life on other planets, the potential is tremendous.

Toward the end of the program, Diamandis predicted that the world's first trillionaire would be a space magnate. Let the new space race begin.

Moderator:
Yoram Wind, Lauder Professor and Professor of Marketing, The Wharton School, University of Pennsylvania

When asked to view a film in which people wearing different-colored shirts passed a basketball to one another and then to count the times the ball was passed from white shirt to white shirt, participants in one study not only turned in counts that differed wildly, but 50 percent of them utterly failed to notice a gorilla walking through the middle of the room. Moderator Yoram Wind of the University of Pennsylvania described this as an apt metaphor for the failure to recognize problems in any given business in a changing and increasingly "flattened" world.

Held up as the quintessential example to the contrary was the Li & Fung Group, which has achieved a remarkable level of fluidity within a new, "network-centric" business model. At Li & Fung, products are assembled from parts produced throughout Asia in such a way as to maximize comparative advantage by catering specifically to each customer's unique needs. Barbara Meynert asserted that creative resourcefulness makes it possible to create value for the entire supply chain, and ultimately for the consumer. One means toward this end is the utilization of teams for each individual project that share incentives with the customer to be efficient and provide a high-quality product. Another method is the use of local people as "orchestraters" of operations on a region-by-region basis.

All the panelists agreed that for a network-centric business to thrive, it must develop relationships of trust based on financial transparency and fair reward incentives. Philip Evans of Boston Consulting Group noted that these relationships often take longer to form, but that the returns speak for themselves when compared to the traditional management style of the old firm-centric model. Examples cited were eBay and Amazon, and the use of consumer feedback by both to garner the trust of the community that uses their services; a bad review of a book may seem counter-intuitive in the short run, but in the long run, the trust it creates produces extraordinary returns. In the case of Toyota, it was pointed out that shared intellectual property rights facilitate faster technological innovation, compared with a lack of openness in GM.

In addition to fluidity, trust and transparency within a given business, increased efficiency can be found in the network-centric model via the consumer themselves, who in many cases take up responsibilities like design free of charge. The example of threadless.com was presented in this light, where customers design their own T-shirts. Open source software and the success of Linux, in particular, is perhaps the best example of this trend.

While the panel focused for the largest part on these various strategies to increasing comparative advantage within the network-centric model, the starting point for each of the panelists is that the network form does indeed provide a competitive edge. The question, then, becomes one of transition, or what Meynert characterized as a "mind-shift" away from the firm-centric model.

In responding to a question from the audience as to whether or not the American culture of individualism represented a potential barrier to entry into network-centric businesses, Meynert shared the moment when she herself first "saw the flat world" in a group of tech-savvy youngsters. Evans provided the example of Lexus Canada for successful North American network-centric business, but he also acknowledged that mind-shift is not a trivial concern, and not always easily achieved within the existing corporate structure.

Federico Sada Gonzalez of Mexico′s Viitro, S.A. de C.V., described the change in terms of what used to be big fish and little fish. Now, he said, the fastest fish eats them both. Perhaps the gorilla in the room is not a problem with the existing paradigm, but rather our failure to recognize and successfully transition to a better one.

Speaker:
Juan Enriquez, Chairman and CEO, Biotechonomy LLC; Author, Untied States of America: Polarization, Fracturing, and Our Future

Join us for an interactive conversation with Juan Enriquez, bestselling author, businessman and academic who is recognized as one of the world's leading authorities on the economic and political impacts of life sciences. Fortune magazine has called him "Mr. Gene." He is the author of the global bestseller, "As the Future Catches You: How Genomics and Other Forces are Changing Your Life, Work, Health and Wealth," and his most recent book, "The Untied States of America: Polarization, Fracturing, and Our Future," which explores why some countries are successful while others disappear. He will focus his discussion with the audience on the question: What will the U.S. look like in 50 years?

Moderator:
Maria Livanos Cattaui, Secretary General, International Chamber of Commerce

By now, the outsourcing of production and services by U.S. companies to countries like China and India has become commonplace, much studied and much debated. But while most of the focus has been on manufacturing and, more recently, the service sector, the new frontier also encompasses medical research. This might result in lower costs for research, but it will certainly affect U.S. scientific competitiveness. Imagine being able to live longer thanks to clinical trials in India that led to the discovery of a new cancer treatment. Or having your life saved by a new heart valve that was developed in China. What are the opportunities and pitfalls of doing medical research in developing economies? Will this trend further research into global health issues? Will it help or harm U.S. innovation and competitiveness in biomedical research? More importantly, how will this trend affect people's health care?

Moderator:
Nir Kossovsky, CEO, Technology Option Capital LLC

Current models for funding early-stage health-care innovations leave many promising firms without cash or out of business, while others never get through to a first round of investment. Communication between the innovators and investors is inefficient. The innovations that do get funded usually meet specific sweet-spot investment criteria for returns, leaving many other opportunities unfunded. How can we change this so that young innovators, especially in the area of biotechnology, get the capital they need to discover new, potentially life-saving drugs? One new model has successfully funded innovations in cardiovascular disease, stem-cell harvesting, non-toxic cancer treatments and drug-delivery innovations, generating good returns on private-investment capital and public-equity share price appreciation. Other approaches pool patents to spread risk across multiple opportunities. This session will explore various ways to use alternative financing vehicles to fund medical innovation.

Moderator:
Tony Uphoff, Publisher, The Hollywood Reporter; President, VNU Film & Performing Arts Group

Hollywood and Wall Street are forming deeper ties, technology is driving distribution and multinational media companies are set to benefit from changes in the way investments are being made to the bright lights of show business.

Investing in entertainment has historically been a tricky proposition for investors wary of volatility and unpredictable returns. Yet in recent years, there has been a tremendous influx of new capital, new equity and financing innovations that are fueling programming ventures. Hollywood has restructured its corporate identity, hedge funds are partnering up with producers, and deals are becoming more creative.

At the beginning of the decade, after the stock market bubble burst, investors were looking for new industries and Hollywood was looking for new forms of capital. Fortunately for both, media companies were in the midst of a massive vertical integration, creating themselves into great corporate identities that not only produced movies but also owned networks, publishing companies and sports franchises.

It was the "corporatization" of Hollywood, as panelist Sanford Climan of Entertainment Media Ventures Inc. noted. And with that, media companies became easier to analyze for Wall Street. Panelist Aizaz Shaika of BNP Paribas, said the rise in transparency among media companies made the industry more attractive to investors.

Hollywood also finds itself with a new breed of partners is the form of hedge funds. From Batman to the Matrix, private equity funds are teaming up with producers to finance new films. Many studios are finding this to be a welcoming sign. As Climan put it, "the studio′s desire for long-term partnerships with financial players is a new phenomenon."

Despite the new investment levels, the entertainment industry is still a tough proposition. Panelist Roy Salter of The Salter Group described the difficulty to investing, from understanding the nomenclature to following the cash flow. If investors aren't diligent in their research, he said, they could have a flop on their hands. However, he added, these highly integrated and diversified conglomerates present many opportunities for creative deal making.

The panel agreed that there is a great future for this industry and that the percentage of consumer spending in likely to increase in the coming years. They cautioned that technology will further flatten the distribution channels with the introduction of push-button entertainment, where eventually all media will be "on demand." Furthermore, the definition of "Hollywood" and what it produces is likely to broaden. For example, communication is becoming more a part of entertainment. As Climan explained, if you're not on the phone for business, then that's a form of entertainment.

Moderator:
Christopher Ludeman, President, U.S. Brokerage, CB Richard Ellis

"Real estate is about as inflexible a market as you can get," said Leslie Whatley of Morgan Stanley. This inflexibility leads to market rigidities that inhibit market efficiency. For example, if a firm suddenly needs additional space capacity, it may face market shortages, especially if the demand for corporate real estate is cyclical. Therefore, the firm must plan ahead. One way is to hoard office space so that the firm can have spare capacity to grow. Whatley argued that this was a sound strategy for many firms because, as she noted, "I′d rather be long a little bit than be short of space."

Although such rigidities persist in the corporate real estate market, new financial innovations are helping to unlock the value of these assets from the balance sheet. Thanks to new forms of insurance, several manufacturing firms now have greater real estate value than operational value. When AIG stepped into the market for environmental insurance, this made contaminated property attractive. Ten years ago, these contaminated properties were unattractive because the downside risk was too high, explained William Lindsay of Coast Capital Partners. Now that stop-loss insurance is available, these properties have potential market buyers.

The key to improving efficiency in the corporate real estate market may be to match firms' real estate needs with the needs of financial markets. Lindsay recommended that firms strip out the income flows from their real estate assets to try to make cash flow as predictable as possible. He said that predictable cash flow "is most important to financial markets."

Yet many firms have unique needs that would have difficulty following such a strategy. If the financial structuring behind a real estate asset becomes too sophisticated, it can impair the value of the asset. Whatley argued against layering too much "fancy stuff on top" because at the end of the day, the land serves a business purpose. Too many financial instruments added on top of an asset can reduce the flexibility of an asset. This can cost the firm dearly in the future if it cannot sell an asset because of the structure of the financing.

In addition to the financial structuring behind a real estate transaction, firms must also pay attention to the human capital considerations. For example, Whatley said, "If you put real estate in the wrong place and human capital does not want to go there, you lose that human capital." If the firm's employees do not want to relocate, then the firm must find new employees, which can be a huge cost consideration. Therefore, human capital must be part of any corporate real estate decision.

Not all the issues are business-related, however. Another major factor is regulation. Phil Cyburt of Cyburt Hall Holdings talked about the effects of Sarbanes-Oxley regulation on smaller companies that lack the basic infrastructure to face these regulatory "diversion costs." These regulations have distorting effects, argued Lindsay. He called it ironic when regulations designed to preserve liquidity have the perverse effect of making markets less functional.

Despite these new regulatory challenges, Lindsay predicted that the cost of capital for real estate will come down. He pointed out that many deals fail to materialize because of a lack of financing due to excessive risk. Current private equity investors are unwilling to hold large risks unless they can charge large premiums to cover the risks. But in the near future, private equity groups specializing in real estate will be going public. This will create blind pools of capital for private equity investments. The result will be "deeper markets" with less need for large-risk premiums because the risk will be pooled across a broader market.

Moderator:
Mark Leavitt, Managing Director, Head of Media and Communications, Jefferies & Co. Inc.

"Traditional media is not going anywhere," confessed Ross Levinsohn of the interactive media division of Fox News, stopping just short of declaring it dead.

The success of the Internet as an entertainment content platform has transformed the way traditional media companies think about reaching their users. Are the major media and entertainment corporations prepared for this change? A distinguished panel composed of leaders in the entertainment industry gathered to discuss this issue.

Jason Goldberg of Katalyst Films agreed that the future of programming is on the Internet and said he thinks that users do not want to be "served" content; they want to seek it out themselves. Viewer participation, interaction, choice and control themes continued throughout the discussion. Levinsohn noted that Fox is well positioned to reach audiences through nontraditional means with its recent acquisition of MySpace.com. Given the growing popularity of online social networking sites, Fox now can offer advertisers access to millions of people through the site.

However, access to online audiences is only part of the equation. It is just as critical, stressed Dwight Caines of Sony, to integrate traditional and emerging forms of content delivery into the same products. For example, The Da Vinci Code movie trailer contained a puzzle that led viewers to an Internet site, which then led them on a 24-hour online quest similar in spirit to the one featured in the movie. Similarly, Underworld 2 was marketed by releasing an online game where players were told that the movie would provide clues and cheat codes necessary to win the game.

Finally, Jim Bankoff of AOL said he is looking forward to positioning AOL as a content distribution platform for traditional media companies. He stated that many online users are interested not necessarily in creating content so much as personalizing and "contextualizing" it: tagging, rating and categorizing previously created content. However, in this scenario, piracy remains a concern, added Caines, as users share copyrighted materials on their personal sites. He stressed the importance of educating young people about the importance of intellectual property protection as the industry moves forward with delivering digital content.

Moderator:
Lewis Feldman, Chairman, Los Angeles office, Goodwin Procter LLP

Has the real estate boom of recent years come to an end? Worse yet, are we at a valuation peak that will soon give way to a sustained bear market in U.S. real estate markets? This was the primary question addressed by the four panelists at this session.

The panelists represented the leaders in the hotel, office, retail and residential sectors of the U.S. real estate market. Sam Zell of Equity Office Group, David Simon of Simon Property Group, Stuart Miller of Lennar and Barry Sternlicht of Starwood Capital shared their views on the questions of real estate valuation, macroeconomics, international real estate markets and the capital markets.

The key question of real estate valuation provided ample opportunity for debate among the panelists. Although all four experts were optimistic about certain areas of the real estate markets, Sam Zell and Stuart Miller took a more bullish stance, with Barry Strenlicht and David Simon providing a more tempered view.

Miller looked to economic and population growth, as well as land scarcity in population centers to support his view of increasing land values in the future. Zell echoed this view of supply-and-demand factors, and pointed to the growth in liquidity turning to real estate to achieve yield objectives.

Sternlicht chimed in that "this is too bullish" and focused on increased leverage levels and the low cost of debt as hints of an overheated market. Simon agreed and added that retail properties, in particular, had benefited from high rents and high yields on development. He said he sees these results declining in the near term, as yields begin to approach the lower yields found in other sectors of the real estate markets.

All four panelists found technology to be an integral part of their operations, affecting either their marketing, production or both. Zell said that technological superiority provides a strong competitive advantage in his Mexican homebuilding business and that equity will continue to succeed in this market as long as such an advantage persists.

After a rousing discussion covering many key issues of the current markets, moderator Lewis Feldman of Goodwin Procter LLP asked the question many audience members had been waiting for: "What is your favorite type of real estate asset now?" Zell chose Brazil; Miller chose scarce land in growing U.S. coastal markets; Sternlicht favored European properties, such as hotels; and Simon liked strong super-regional malls.

Moderator:
John Cavalier, Managing Director and Chairman, Global Energy Group, Credit Suisse

Panelists explored the need for renewable energy sources and the future landscape of alternative energy in the United States. Energy, particularly affordable and sustainable energy, is undoubtedly central to global economics and well-being. As moderator John Cavalier of Credit Suisse noted, "The economic dislocations of high energy costs reverberate through the entire economy."

The group explored four imperatives for alternative energy sources. First, the dynamics of supply and (high) demand mean that the current scenario is unsustainable. "There's no question from a supply-and-demand perspective that demand is increasing by extraordinary rates," observed Daniel Weiss of Angelino Group LLC. Current oil prices are an obvious symptom of this issue, he said.

Second, the aging infrastructure of U.S. energy production and distribution means that the present system must be updated, likely in favor of renewable sources. As an example of the outdated infrastructure, panelists mentioned the limited oil refining capacity the United States. Indeed, the last refinery built in the United States was in the 1970s; it is unlikely that new ones will be built. The New York blackout of 2003 was cited as a symptom of the problem.

Panelists agreed that the environmental issues, particularly global warming associated with traditional energy, sourcing are a widespread and enduring concern.

Finally, the panel members discussed the geopolitical incentives for alternative energy. The growing American consensus is that the United States should be less dependent on foreign oil, given increasingly complicated politics of doing business with the oil-exporting countries and the concerns regarding national security.

While the reasons for establishing alternative energy sources are clear, the industry is just beginning to develop. Alternative energy includes wind, solar, geothermal, biofuel, clean coal and fuel cells, among others. At present, alternative energy constitutes just 6 percent of U.S. energy consumption; globally, this total is 12 percent to 13 percent. Overall, panelists expect this must and will increase dramatically in the coming years.

The U.S. government's role in this changing landscape will be significant, the panelists agreed. In order to foster development of the industry, the government should set standards for alternative energy sourcing (such as the required ethanol content in gasoline); provide financial (loan) guarantees for the more expensive infrastructure needs regarding alternative energy development; and continue existing tax credits and incentives (such as the $0.51 per gallon incentive for ethanol). As the industry develops over the long run, the government′s role in the industry is expected to dissipate.

Overall, panelists were optimistic about their growth expectations for alternative energy. As Weiss noted, "Real companies with real products and real profits are solving real problems [already]." Moreover, they said that cross-border learning would be essential to developing a vibrant alternative energy industry. Brazil, for example, was cited as an international leader. Alan MacDiarmid of the University of Pennsylvania commented that "we can learn a great deal from other companies and partnerships." Another panelist, Neil Koehler of Pacific Ethanol Inc., concurred that this global approach was necessary, stating that "In the future, there will be no one form of alternative energy that is suitable for any one country."

Moderator:
Tina Sharkey, Senior Vice President, AOL

The rise of bloggers is having a profound effect on traditional news media. Today's youth increasingly view newspapers as an anachronism - what LPs are to iPods. They increasingly rely on blogs, RSS feeds and other tools that bring them just the news and information they want. The traditional news media has been slow to understand the impact of this trend, not only on their profession, but its impact on maintaining an informed citizenry. Is this new, citizen journalism encouraging open discussion, debate, and learning? Or is it contributing to an increasingly polarized country, with people consuming only the news that fits their existing viewpoints? This is a discussion the country needs as news production and consumption undergoes a radical transformation.

Moderator:
Richard Sandor, Chairman and CEO, Chicago Climate Exchange Inc.; Senior Fellow, Milken Institute

An increasing number of financial players have entered environmental markets and a business solution to long-standing environmental concerns is taking shape. Over the past year, institutional investors controlling more that $21 trillion in assets have backed the Carbon Disclosure Project, an effort to record greenhouse gas emissions from the world's largest firms - and corporations, cities and markets are taking notice. Almost 50 public and private carbon funds and carbon-tender programs have been launched, with more than $1.5 billion in dedicated capital. Over the past year, the prices paid by carbon emitters to those who reduce carbon emissions rose more than 300 percent. Investments in clean technology are growing at more than 30 percent annually. Shareholder resolutions addressing climate change have been filed at more than 30 U.S. funds. There are many opportunities for investors and corporations in these new environmental markets and this panel will look at this expanding, profitable market from the perspective of hedge funds, rating agencies, pension funds, corporations and government.

Moderator:
Dennis Kneale, Managing Editor, Forbes

Dennis Kneale, managing editor of Forbes, kicked off the discussion by asking Chad Hurley about the start of YouTube. Hurley, the company′s CEO, explained that YouTube began life as a way to share homemade videos. However, an eye-opening shock for major networks was the rapid adoption of the Chronicles of Narnia SNL spoof, which circulated among millions of users due to its posting on YouTube. NBC then contacted Hurley to take down the video.

Richard Cotton of NBC then shared his expertise on the distribution and licensing of videos, stating that major networks have made major investments in content and will always have a need to monetize it. Darcy Antonellis of Warner Bros. followed up with her view that in today′s market, major networks and sites like YouTube will move toward partnerships.

Kneale then posed the question, "Is posting something on YouTube stealing?" Attorney Kirkman responded, saying that "the responsibility was ultimately with the user who posted," and Cotton broke in with a resounding "Yes!"

Kneale then stirred up the topic of "the big guys wanting it both ways," getting free promotion, while still wanting people to pay for their content. The panelists responded that distribution of "free" content was like marketing in any other industry. Kneale then asked Hurley about MTV′s response to posting its videos without permission on YouTube, to which Hurley responded that he had recently done a deal with MTV to promote videos on the network′s site. He concluded by saying, "People today want bite-sized pieces of content."

Kneale then shifted to the issue of the Internet being a place where "you can put anything anywhere," and asked how the media industry was prepared to deal with this. Cotton responded that this development, while risky, gave the industry the "ability to reach consumers in a new way," and reinforced Antonellis' earlier ideas about exploring partnerships in order to take advantage of the new technological advances. However, he placed a decided emphasis on the fact that the online piracy is not a viable in the long run.

The conversation then shifted to the fact that broadband has become more prevalent, with 60 percent of broadband focused on peer-to-peer activity, most of which is illegal. As the panelists deliberated on how to deal with the legal implications, Cotton spotlighted the music industry as the "poster child of where no one wants to go," and emphasized that "the best way to prevent copyright infringement is to build it into the technology." Kneale followed by saying that the video industry has shown itself to be much more receptive by integration with sites such as YouTube, leading up to his next question: "How good a job is the industry of embracing the new changes?"

Antonellis responded that the major studios were very receptive to using the Internet and embracing the new technology as part of the distribution platform, as long as they made up proper business rules with the sale of content. She also talked about initiatives to have movie trailers and promotional materials on the Warner Bros, web sites. Kneale asked the panelists if they thought the industry was running behind in its modes of video distribution. Hurley responded, saying "they are in a sense, playing catch-up."

The panelists also discussed the future of content, who would provide it and who would pay for it. Cotton discussed NBC′s new "broadband studio," focusing on short, focused content based on existing network content. Kneale then asked if the panelists thought that any type of user-generated content would be able to achieve the success of a sitcom like "Friends." Hurley thought that it would be highly possible, while Cotton disagreed, saying that the factors going into producing that type of content were too complex, and that networks would be the primary source of highly produced viewer content.

The second topic, who would pay for content, covered the two main avenues of revenue: subscription services and advertising, with Kneale making the point that networks have let us know how much value it is for them to be showing an ad to a customer (for example, that it costs two dollars for a consumer to watch a show without advertisements). The panel concluded with the general consensus that the way advertising is made is changing, and that viewers have more choices about the content that they view.

Moderator:
Ken Rutkowski, Host, President, KenRadio Broadcasting

The Internet is finally emerging as a true entertainment medium. More than half of all homes in the U.S. are now on broadband, the amount of quality content has exploded and we have reliable online video playback technology and better search tools. Just as importantly, there is a business model to support it: free-to-consumer, ad-supported content. And now we are seeing technology, such as Intel's Viiv platform, that can make it work seamlessly on TV. The panel will look at how this trend will change the production, distribution and consumption of entertainment, and how advertisers will fit into this new, on-demand world.

Moderator:
Glenn Yago, Director, Capital Studies, Milken Institute

Open recognition of the real risk of global warming has finally hit the table in the boardroom, and not a moment too soon, as both scientists and economists would appear to agree.

What was a major theme for many of conference panels was, in fact, the entire focus of this session, summed up by panelist Richard Sandor of the Chicago Climate Exchange with the succinct phrase, "You can do good and do well."

In this session, the panelists fleshed out this proposition in very concrete (or perhaps carbon) terms, demonstrating not only the success of their own firms, both in terms of emissions control and financial gain, but also suggested several ways in which market forces are providing powerful incentives for potentially limitless growth in this direction for businesses in all lines and across all borders.

Representing leaders in industry, finance and the rapidly developing climate exchange market, each panelist had hopeful insight to provide, based on his own experience on how saving the planet is not only possible, but profitable.

Beginning with the time-honored assumption that "as goes GM, so goes the United States," a mere nod in the direction of GM's current predicament provided the backdrop for the urgency with which leaders in the business community are turning toward green solutions in general, and to carbon asset markets, in particular. For the non-believers, Sandor pointed out that not long ago, the commoditization of debt was regarded as impossible. Now we have the commoditization of pollution.

Sandor explained that the general trajectory of government regulation was moving from no controls to what he characterized as the "one size fits all" controls of the 1970s and to the 1990 Clean Air Act, which for the first time targeted one environmental problem (acid rain) and one pollutant, sulfur dioxide (SO2). The subsequent success the act in dramatically lowering SO2 emissions led, even if only as an indirect consequence, to the establishment of opportunities for new financial markets, ultimately manifested in the Chicago Climate Exchange and later the European Climate Exchange.

Neil Eckert of the European Climate Exchange predicted a $2.3 trillion carbon market by 2012 but asserted that the liquidity required to foster continued entry from new sectors is dependent upon cap-and-trade legislation. He described the myriad opportunities for investment that caps provide to businesses seeking to meet emissions requirements and, in turn, trade carbon points, ranging from the energy needs of small businesses to the infrastructure needs of developing countries.

Sandor added to this that financial performance of publicly traded companies has been shown by market analysts to be influenced to a very real extent by their eco-performance, based on consumer preference. Tipping his hat to the increasingly popular theme of financial transparency, Sandor said "... in other words, now is not a good time to be a misogynist, homophobic, racist polluter in the world market."

Each panelist, when asked why he became involved in carbon trading, credited Sandor as both the inspiration and motivation, which would seem to go a long way toward emphasizing the importance of leadership and human capital in addressing the environmental problems facing the world today. Beyond their collective endorsement of Sandor's ideas, two reasons for involvement in this market were cited repeatedly: the first being necessity (cap), the second being opportunity (trade).

In the case of DuPont Co., according to Edward Mongan, the company′s director of energy and the environment, initial interest in reducing emissions stemmed directly from the Clean Air Act and the increased awareness in the early 1990s of the dangers of greenhouse gases. The realization that this could have potentially disastrous financial repercussions on DuPont's particular line prompted immediate action long before the company saw potential for financial growth through carbon trading -- which it eventually did, a point not to be overlooked.

In the first instance, however, merely in an attempt to meet tightening government regulations beginning with the Clean Air Act, DuPont enacted policies that reduced its output of greenhouse gases from 90 million metric tonnes in 1990 to roughly 25 million metric tonnes in 2003.

It also bears mentioning, said Mongan, that during the period from 1999 to the present, DuPont's emissions have remained relatively flat, but that production has increased by more than 30 percent. This would appear to imply increased efficiency in production, even in excess of what the figures on total emissions reflect, perhaps providing the emissions points that have propelled DuPont into a prominent position in the emissions market. Beyond the initial need to fall into line with government caps, the potential for revenue generation via emissions credit trading was a huge incentive, not only for DuPont's involvement in this market, but for its continued effort to decrease emissions levels.

Echoing Edwin Mongan's sentiments, Bill Marcus of Chicago Calyon Financial cited the sheer enormity of the market itself as his company's primary motivation for participation. As he explained, a certain level of liquidity in any given market automatically attracts other players to the field, regardless of their level of concern about the environment. By his estimation, the brokerage community's involvement in the carbon asset market has reached that point in its parabolic curve where it is poised to explode, with potential to become perhaps the largest financial market in history within the next 50 years.

Other ideas that were addressed on the subject of opportunities and challenges presented by a brand new asset class (such as carbon) included the creation of new bodies of experts who can analyze and study the role of such variables as weather, policy, new consumer bases, geographic borders and education on the development of the market and its efficacy, not only in financial terms but also in human and environmental terms. Increased attention from academia was called for in producing knowledge, especially with regard to the developing world, and Sandor announced that as of the previous week, the Chicago Climate Exchange had added its first Chinese company to the membership.

In response to a question from the audience about how to convince businesses to open carbon accounts -- in this case, based upon a disappointing meeting with a major player in the entertainment world -- Sandor and the other panelists suggested two strategies, one negative, the other positive.

It is indeed odd, Sandor pointed out, that for all of their lip service to environmental causes, there are currently no major Hollywood studios with carbon asset accounts, an example, he said, of what they call in Chicago a case of "all hat, no cattle."

Mongan suggested that the first thing would be to attract a given company's attention to its own carbon footprint. Running those numbers, which is not yet a standard practice, is frequently enough of an eye-opener to motivate a board of directors to move in a greener direction, especially in light of the likelihood of stricter government regulations.

Sandor added that along with risks posed by government intervention, there is also the potential for financial risk in the form of a class-action lawsuit from the effects of pollution, and in turn for related negative publicity. In the case of the particular Hollywood giant in question, he said, any connection between its emissions and associated health crises in children could be its undoing.

On the positive side, he added, the incentive for financial gain and the potential to be in the entertainment world what DuPont is in the chemical world, i.e., the leader, could prove to be the most powerful motivator.

Whether altruistic government regulation or profit-motivated innovation (or flexible and creative combinations of the two) actually has the potential to save the planet remains to be seen. One thing is apparent, however, and it is that potential exists beyond what might have been conceivable to most as little as five years ago. This panel not only demonstrated the enormous degree of change already occurring, but the ever-increasing opportunity for the business community as a whole to join this movement and increase its momentum.

Speaker:
Steven Chu, Nobel Laureate, Physics, 1997; Director, Lawrence Berkeley National Laboratory

Moderator:
Richard Sandor, Chairman and CEO, Chicago Climate Exchange Inc.; Senior Fellow, Milken Institute

Nobel Prize winner Steven Chu, introduced by Richard Sandor, founder of the Chicago Climate Exchange, built upon his earlier lunch lecture and discussed three major topics: the climate change caused by excess carbon dioxide in the atmosphere, the possibility that we will run out of oil and what we can do about each.

Chu began by reviewing the world's use of energy over time. By 2025, he predicted, the world will use three times the energy it did in1970. Given that we chiefly depend upon fossil fuels, this implies greater carbon dioxide in the atmosphere. Carbon dioxide lasts a long time; even if we stopped adding to it, the world would continue warming. At twice the carbon dioxide levels of pre-industrial times, the world climate would shift by several degrees, growing hotter in the Northern Hemisphere, colder in the Southern Hemisphere.

Chu cautioned the audience to not underestimate a few degrees: for example, he said, 8 degrees Celsius separates today's average temperatures from that of the last ice age. As the temperature rises, glaciers melt, reflecting less heat back into space and speeding the warming. Although the warmer weather should encourage more plant life, which would remove more carbon dioxide, even the most generous models do not predict much relief. Our agriculture in the Northern Hemisphere would be threatened by this climate change; already California farmers can no longer depend upon water from the Sierra Nevada Mountains.

Chu discussed the possibility of storing carbon dioxide underground, out of the atmosphere. Oil drillers are already using carbon dioxide to push out more oil. South Dakota actually exports carbon dioxide to Canada for this purpose. Unfortunately, if carbon dioxide leaks out, it can be deadly, and oil companies have been reluctant to monitor study how this leakage happens.

This growth in carbon dioxide as an asset is fueled by a dwindling resource: oil. The United States is the wealthiest country in the world and consumes the most energy per capita. Until 1970, the United States was a net exporter of oil; now it imports 60 percent of its oil. China seems poised to follow in the same path; it is now importing 50 percent of its oil and will have to increase to 75 percent soon. Although no one knows with certainty, predictions of a peak of oil production have been continually made. Chu said he doubts whether the world will run out of oil in the foreseeable future; current drilling methods only recover 30 percent to 40 percent of the oil available.

Chu said he believes we have two parallel paths for our energy needs: conservation and the development of new, cleaner energy. Although he said that the free market is the most nimble way to accomplish technology gains, he acknowledged that there are certain limitations, such as externalities (prices do not capture damage from pollution), and that free markets only promote local optimization in time or geography (a shortage of fish fuels more fishing). He used the example of refrigerators to show how government regulation can help the free market. Refrigerators have steadily gone up in size but have used continually less energy since the mid-1970s, when the federal government started requiring stricter energy guidelines. The real price for refrigerators has gone down, as well. This is an important example, since 40 percent of all energy is used to heat or cool, he said.

On the "supply side," Chu considered new fuel sources, such as coal, fusion, fission, wind, photocells and biomass. There seems to be at least 200 (perhaps a 1,000) years left of coal, he noted. Unfortunately, coal puts out even more emissions than oil. Chu dismissed fusion as not being a major player for the rest of this century, at least. Fission is marred by the waste and nuclear proliferation issues. Even if Yucca Mountain finally opens for nuclear waste, he said, it would be filled by 2010. Recycling the fuel reduces waste by a factor of 10, but involves plutonium, which can be "weaponized," creating a security risk. Wind is also a strong possibility as a new energy source; its cost is within 20 percent of commercial viability.

Chu seemed to feel that using biomass as an alternative fuel source was perhaps the strongest possibility. He noted that the recent history of agriculture has allowed us to feed more people on less land. In fact, he said, the federal government pays many farmers to not grow crops. New trade agreements will make it less likely that the United States can sell the heavily subsidized crops on the world market, making it ideal for biomass energy, such as conversion to ethanol.

Sandor discussed his reactions as an economist, saying that he found Chu's words sound. He said the question on pricing externalities was very interesting. For example, the United States passed a cap on sulfur emissions in response to the problem of acid rain. His organization, the Chicago Climate Exchange, manages the trading of the permits that allow the sulfur polluting. This, he said, set up price signals that encouraged scrubbers in smokestacks, the switch to low-sulfur coal and the switch to gas.

Both Chu and Sandor agreed there were large gains to be made in non-fossil fuel energy sources, particularly biomass. Sandor quoted a member of OPEC who said, "The Stone Age didn't end because they ran out of stones." Similarly, both men said they were optimistic that the world would shift to other energy sources well before our oil runs out.