Case Study Seven
Mike Milken’s Capstone
The Prosperity Formula And The American Dream
“To create a meaningful life, you have to create more opportunity for others.” – Mike Milken
~ Introduction: A catalyst in Watts ~
In 1965, during summer break from Berkeley, 19-year-old Mike Milken encountered a man whose words would shape the rest of his life. Amidst the Watts riots in LA, the man told Mike that his father, because of race, had never had access to capital and believed he never would. This changed Mike’s view of the world as he began to think about equal opportunity and the right to succeed.
Mike returned to college and changed his major from maths and science to business. He had found his red thread: the democratization of capital. That idea became his life’s organising principle and the foundation for a personal formula for prosperity that would later transform finance, medicine, education, and philanthropy.
CORNERSTONE: FROM COMICS TO CAPITAL
Mike was born in 1946 to a middle-class Jewish family in Encino, California. His father was an accountant-turned-lawyer. From a young age, Mike showed signs of unshakeable confidence. At 11, he wrote to President Eisenhower offering to lead the U.S. space programme, before NASA or DARPA even existed. He was inspired by Marvel comics and heroes like Superman, figures who proved that one person could have a tremendous impact on the world.
He graduated top of his class at both the University of California, Berkeley and Wharton Business School. Former classmates and colleagues consistently refer to him as “the smartest person I’ve ever met.”. This remains the case on those that work alongside Mike still.
THE PROSPERITY FORMULA
As mentioned in the introduction, Mike developed his own formula for prosperity in the mid-sixties. A financial genius, he believed that prosperity equalled the effect of financial technology acting to multiply the value of human capital, social capital, and real assets:
Prosperity = Financial Technology × (Human Capital + Social Capital + Real Assets)
It enabled Mike to analyse the inputs that impact prosperity and how financial technology can create outsized effects. By focusing on innovative processes and components of financial instruments, he could unlock the potential of what he considered the most undervalued yet largest asset: human capital, especially when conditions such as social capital and real assets could function and flourish.
It was remarkably astute for someone so young and would provide Mike with a guiding formula for the rest of his life (and provided inspiration for the Capstones Formula in the book). Mike was already demonstrating a belief in the integrity and power of capital markets, sound capital structures, and the matching of capital to entrepreneurs who could use it effectively. He was soon to apply this in a lucrative keystone phase with record-breaking financial returns
KEYSTONE
Mike joined Drexel Burnham’s Philadelphia office in 1969 as a part-time computer analyst while still at Wharton. After completing his MBA, he joined full-time, and just two years later, at the age of 25, he was put in charge of their new-fangled bond department.
Where others saw financial risk, Mike saw asymmetry and potential. He believed that the greatest investment opportunities lay in the overlooked and underrated, specifically, in companies with less-than-investment-grade credit ratings. His view was that future cash flow mattered more than historic accounting. He also was one of the first to view human capital as part of a company’s balance sheet.
Mike was known for his relentless work ethic, regularly putting in 15-hour workdays to bring his hypothesis to fruition. Mike reportedly had three assistants, one of whom came in at 3am to line up his day. It was always filled with back-to-back calls. To this day, Mike still fills his day with calls, everyone takes his call, as they know he will have a clear purpose and an opportunity laced with vision.
It turned out Mike was onto something. By 1978, he was generating over $1 billion in revenue from the junk bond market for the company.
One day, however, he received the news that his father had skin cancer and the diagnosis was terminal. Being a contrarian, he forced a move of his 20-person team and their families from Wall Street to Los Angeles. A contemporary profile in The New York Times said:
“He makes so much money for his company that Drexel Burnham is preparing to move its entire bond department from New York to Los Angeles, mainly because Mr. Milken, a native Californian, would like his two children to have a home and a backyard where they can play every single day without worrying about what the weather is going to be like.”
By 1986, the firm, now known as Drexel Burnham Lambert, was generating $125 billion a year from the junk bond market and had gone from a small, third-tier firm to a Wall Street giant.
Mike had a penchant for hosting events at the Beverly Hills Hotel. From Michael Lewis’s Liar’s Poker:
“He hosted a series of his own annual institutional-investment jamborees for money managers in Beverly Hills... formerly called 'The High-Yield Bond Conference', or, by the participants, 'The Predators Ball.' He hired fleets of stretch limos, took over Chasen’s for dinner (carefully arranging seating as a sign of importance) and hired entertainers such as Frank Sinatra, Diana Ross and Kenny Rogers...”
But success brought attention and politics.
In March 1989, at the age of 43, Mike Milken was sentenced by a federal grand jury to ten years in prison and fined $600 million. At the time, he was considered one of the most powerful American financiers and had set the record for the highest remuneration package for one employee of a company: $550 million in 1987 alone. His unconventional deals were ahead of their time. Mike paid the fine, $200 million in fines and $400 million in investor restitution, entirely out of his own pocket. He served 22 months in a minimum-security federal prison.
Much has been written about whether it was a legitimate case or a politically charged one. In 2020, after three decades of campaigning, he received a Presidential Pardon. A White House statement said:
“The charges filed against Mr. Milken were truly novel. One of the lead prosecutors later admitted that Mr. Milken had been charged with numerous technical offenses and regulatory violations that had never before been charged as crimes.”
The prison chapter marked a bardo, a pause, a transition. Time to regroup. Reflecting in Forbes, Mike wrote:
“We were matching capital to entrepreneurs who could use it effectively. We were creating investments that money managers needed in volatile markets… I want to get on with the rest of my life.”
CAPSTONE
Soon after his release, Mike faced a new life-changing experience: being diagnosed with inoperable prostate cancer. He quickly began hormone treatment and chemotherapy.
“It is a war I cannot afford to lose,” he told The Washington Post in 1994.
He beat it. Turning his recovery into a crusadeaccelerating medical research and expanding access to care.
Mike had always been philanthropic, having established the Milken Family Foundation with his brother Lowell in 1982. Searching for medical solutions to cancer became a defining focus. His wife’s mother and his own father had both died of the disease. In 1993, he launched the Prostate Cancer Foundation. On his newfound mission, Mike said:
“For me, 10 seconds used to be a lifetime to make a decision. Now I'd like to see advancements in months, rather than years, in this field—for my future and for all the men who will be diagnosed.”
In 2003, he founded FasterCures, with the mission to accelerate progress against all life-threatening diseases. Frustrated by the slowing of federal research funding, Mike threw himself into this phase with fervour. His vision was clear:
“Our goal is to empower, and make sure that if children want to find out about life-threatening diseases, they have to go to the history books.”
A 2004 Fortune cover story dubbed him:
“The Man Who Changed Medicine.”
At a philanthropists' gathering during the 2014 Milken Institute Global Conference, former California Governor Gray Davis noted:
“No private citizen on the face of the earth has done more to advance the life sciences than Mike Milken.”
~ Philanthropy and the Milken Institute ~
While Mike could no longer work in finance, he had something equally powerful: his unrivalled black book and the goodwill of the many he had helped become wealthy. His Capstone mindset was clear:
“Making money for the sake of making money is a tired old cliché,” said Mike.
In 1991, he established the Milken Institute, where he remains Chairman to this day. As the Institute describes itself:
“As a nonpartisan, publicly supported organisation, we seek to advance unconventional economic and policy solutions that support growth and enhance health, by conducting research and analysis, convening leaders and innovators from diverse fields and competing viewpoints, and constructing programs and policy initiatives to solve the world’s most pressing challenges.”
The Institute works across 12 “tracks,” including Aging & Longevity, Job Creation, Capital Access, Public Health, and Medical Research. All of them tie back to Mike’s original prosperity equation.
Since 1998, the Institute has hosted the annual Milken Institute Global Conference—at the Beverly Hilton, of course. Known as the “Davos of the West Coast,” the event convenes some of the world’s most influential leaders from finance, politics, business, health, and culture.
“See the world through new eyes, to find out how you can work with others to make positive changes in the world,” Mike urges attendees each year.
Mike and his wife Lori have signed The Giving Pledge, alongside Warren Buffett and Bill and Melinda Gates, committing to give the majority of their wealth to philanthropic causes during their lifetime.
For Mike, philanthropic capital is risk capital—to be deployed early, quickly, and boldly. Whether in response to emergencies like pandemics, or in the early stages of research before governments and corporations are willing to step in, Milken believes philanthropy’s agility is its strength.
A particular focus has been on funding young scientists. Mike explains that while Nobel Prize winners are often honoured in their 60s or 70s, the work that wins those awards is usually conceived in their 20s or 30s. His aim? To give these minds fuel early enough to change the world.
In
~ Building Meaningful Lives ~
Access to capital—philanthropic or otherwise—serves as a multiplier on the world’s most powerful force: human potential.
In short, Milken and the Institute are connecting resources (capital) with talent (human capital) to help people build meaningful lives. In fact, in 2017, Mike revisited his formula and updated its framing. ‘Prosperity’ could be swapped for ‘Jobs’. Or even more simply: ‘Meaningful Lives’.
Quoting Eleanor Roosevelt during that year’s Global Conference, he said:
“The purpose of life, after all, is to live it—to taste experience to the utmost, to reach out eagerly and without fear for newer and richer experience. There’s no way we are going to lift everyone out of extreme poverty unless we get much more creative about how we use the capital in the world to create good outcomes.”
~ The Capstone within the Capstone: The Milken Center for Advancing the American Dream (MCAAD) ~
Mike is still applying the very same principles he discovered in his cornerstone and refined during his keystone: meritocratic, creative finance applied to solve the world’s problems.
Looking to the future, he’s focused further upstream, on rekindling the dream that helped shape his own life. Many Americans feel excluded from the prosperity of the last two decades. Half live paycheck to paycheck. Too many feel the American Dream is no longer theirs.
To Mike, the Dream is simple:
“Equal opportunity—not based on where you were born, went to school, who your parents are or what your race or religion is. It’s access to capital based on ability.”
The Milken Center for Advancing the American Dream is both a digital platform and a physical landmark—a 60,000 square foot space on Pennsylvania Avenue in Washington D.C., opening in 2025. Situated between the U.S. Capitol and the White House, its very location makes a statement: the Dream should be at the heart of American life and politics.
Presidents may come and go, but the Center will remain, a beacon for those with ambition and ideas. A platform for telling the stories of strivers. A place where people are asked: What is your American Dream?
Its four foundational pillars are rooted in Milken’s prosperity equation:
Good Health
Good Education
Economic Freedom
Entrepreneurial Mindset
The Center is not just about inspiration, it’s about activation. Giving people tools, access, and belief.
SUMMARY
Mike has a clear formula for prosperity that forms the basis of his Capstone thinking. He constantly challenges us to see the world through new eyes. His Capstone, the MCAAD, is driven by the belief that creative finance can fuel problem solving and disrupt the status quo. Everything Mike does, from the MCAAD to the Milken Institute, goes back to maximising the inputs into the prosperity equation (e.g. human capital) with the mission to enable everyone to dream, find hope and be able to build a meaningful life.
His entrepreneurial finance revolutionized modern capital markets, expanding access to capital for thousands of growing companies that created millions of jobs. An immeasurable amount of wealth has been created solely because of Mike’s innovative work. Free from bias and preconceptions, he financed entrepreneurs who had good ideas, allowing them to build companies that became engines of job creation.
‘Michael Milken democratised capital,’ said his one-time client and billionaire Steve Wynn.
“He created a tremendous pool of liquidity and guided its use with surgical precision.”
I have been lucky enough to present and host events on stage with Mike at Milken in London and Los Angeles. It is one of the most inspiring and progressive gatherings to be a part of. I have seen first-hand Mike’s ability to provide penetrating insights on any subject. Constructive and optimistic, he lures you into his way of thinking, looking at what is happening in society and what society needs. As said by Mike:
“The best investor is a good social scientist, they invest in where the world is going, not where it is.”