INTERVIEW: Milken Institute's Richard Ditizio carves out a niche in the global forum jungle

Sun, 2019-02-10 00:54

In the international forum jungle, roamed by the big beasts such
as Davos, Bloomberg and CERAWeek, how does a middle-ranking player
like the Milken Institute compete?

Richard Ditizio, the institute’s president and chief operating
officer, responded confidently: “What differentiates the
institute is that we operate at the intersection of health and
finance.”

If that seems a little specialized, Ditizio goes to great
lengths to explain that health is not just about clinics or
treatments, but is the totality of human well-being, from
demography through to mortality; and finance is not just about
raising money, but is the complete spectrum of activities by which
people provide the resources for their lives.

Health and finance, he believes, are at the heart of everything
else. The institute calls itself an “independent economic think
tank,” but its raison d’etre is to “apply market-based
principles” to “social issues,” which in effect boils down to
health and finance. “There is lots of robust territory for us
where those two meet,” Ditizio said.

The institute’s lineage demonstrates those values. It was
founded in 1991 by Michael Milken, the financial innovator who
virtually invented the idea of the “junk bond” (high-yielding
corporate debt).

When the world of finance went sour, Milken devoted a
considerable portion of his time and wealth to health issues,
funding philanthropic initiatives to tackle intractable medical
problems, such as melanoma and other life-threatening diseases. In
2004, Fortune magazine gave him a front page with the title “The
man who changed medicine.”

Ditizio will be in Abu Dhabi this week, heading the second MENA
summit that the institute has held in the region. The Middle East
is a virtual petri dish for institute theory, as he explained.

“I’ve just come from Japan, where the problem is the aging
population, but in MENA it’s the exact opposite. Here the issue
is how to make youth function as part of a workforce at 40, 50 or
60 years old,” he said.

This, of course, is one of the main aims of the Vision 2030
strategy in Saudi Arabia: To provide meaningful economic lives for
the Kingdom’s large youthful population, in a situation where the
state will not be able to provide public-sector employment
forever.

Ditizio likes what he has seen and heard of the Saudi strategy.
“Having a plan is a good thing, for a nation or a business.
Diversification, education, health and gender are the areas we see
as important, and these are the key areas of Vision 2030, too.

“You can always tweak strategy as you go along, but I think it
is heading in the right direction. If there are episodic things
that distract from the norm, the strategy will help you get back on
track. It is a touchstone to overcome obstacles,” he said.

However, he warned of the risk that big transformations such as
those being undertaken in Saudi Arabia might destabilize society.
“Stability is paramount. People beholden to the old way of life
may find it tougher. It could get messy along the way, but the
overall results will be positive,” he said.

Women’s empowerment is a big theme for the institute. Did
Ditizio think that the changes in women’s status in the Kingdom
were happening fast enough?

“You don’t want to permanently exclude 50 percent of your
workforce from participating in the economy. Growth in gross
domestic product will escalate if women are allowed to participate,
and if you allow women to balance their personal and professional
lives, it will grow the pool and lift everyone,” he said.

To some extent, the institute practices what is preaches with
regard to gender. In comparison with some other global forums,
which are still overwhelmingly male dominated, Milken has more than
half of its workforce made up of women, and has a target of 30
percent female participation at its events.

“Lots of studies show that companies with more diverse boards
have better financial performance. Those that don’t often fall
behind,” he said.

Like all big think tanks, the Milken Institute has to gauge its
initiatives on issues such as health and gender equality against
the broader backdrop of geopolitical and economy performance. There
is little point planning a long-term strategy on medical or social
issues if the world is going to be turned upside down by, for
example, a confrontation between the US and China on trade, or
another financial crisis.

Stability is paramount. People beholden to the old way
of life may find it tougher. It could get messy … but the overall
results will be positive.

Richard Ditizio

The analogy Ditizio uses — especially in relation to fears of
a US-China trade war — is illuminating. “It’s like the
difference between climate change and weather. There was a polar
vortex in the US recently, but one cold spell doesn’t mean
climate change isn’t happening.

“So although there may be an acute trade spat at the moment
between the US and China, each country is so important to the other
that I don’t think long term they are going to set out to derail
each other’s economies,” he said.

Ditizio applies the same reasoning — long-term progress versus
short-term “episodic” events — to the Middle East, too. “In
MENA, we are all aware of the specific risks, but are they
systemic, life-changing risks? If you develop economies in order to
give people a more prosperous life, they are less likely to get
involved in terrorism.” 

That introduces another key theme of the Milken Institute’s
thinking — the power of financial market forces to bring about
desirable social and economic change.

“There are pockets of capital around the world, some estimate
it at $30 trillion, that are not being deployed. They are on the
sidelines of the global economic system, in offshore funds,
invested in other things outside the system. It’s capital that is
not being used. If you can deploy that, you can help lift economies
and generate a nice financial return,” he said.

That brought us to one of the big debates in the forum circuit
at the moment: The role and power of philanthropy. At the World
Economic Forum in Davos earlier this year, there was a disagreement
between major donors such as Bill Gates and those who felt that
big-name philanthropy was overrated and should now step aside in
favor of a more efficient global tax system.

It is an area where Ditizio, as a former head of private banking
for Citi North America, dealing with high-net-worth individuals on
a daily basis, has some expertise.

“I think there is a disproportionate amount of attention given
to the big-name philanthropists. There was something like
$350 billion donated in the US last year, and most of it was not by
the ‘big’ philanthropists. But philanthropy still has a role,
and that’s especially true of the Middle East, with the system of
voluntary giving via zakat (Islamic charitable giving),” he
said.

The other theme that he predicts will emerge at the MENA summit
this week is technology, and its potential to upend traditional
ways of thinking across health, finance and the regulatory systems
that govern them.

“We are seeing it in fintech, and how that is changing the
regulatory relationship; we’re seeing it in the clinical field,
where artificial intelligence (AI) could be running synthetic
trials of medicines,” he said.

The changes wrought by technology are fundamental. “Today we
cannot live without an iPhone. Twenty years ago we had nothing,”
he said.

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Source: FS – All-News-Economy
INTERVIEW: Milken Institute's Richard Ditizio carves out a niche in the global forum jungle