Some of the Pioneers
Funded by Mike Milken
Bill McGowan
MCI Communcations

Mike Milken's legendary Wall Street career began in 1969 when he joined the firm that would become Drexel Burnham Lambert. Having completed in-depth studies of financial history and debt at the University of California, Berkeley and of corporate capital structure at the Wharton School of the University of Pennsylvania, Mike concluded that the key to institutional competitive success on Wall Street was research. This was an inversion of the pyramid at most firms where sales was valued most, then trading, with research at the bottom. This belief was the foundation for his financial revolution, which helped build America's current industrial and commercial infrastructure. Simply stated, Mike believes that capital structure matters. The choice of capital structure can significantly affect the valuation of a company and the risk of investing in it. Over two decades, Milken financed more than 3,200 companies that became engines of job creation beginning with his very first transaction, which helped assure Boeing's market leadership through the rest of the century.

Starting in Drexel's fixed-income research department, Mike eventually assumed responsibility for a wide range of financing that used more than 50 types of securities in 14 asset categories to provide customers with a full range of debt and equity services to match their capital-structure needs. By 1976, he had established unrivalled credibility and trust by building up the quality of Drexel's debt research: the financial theories he developed in the 1960s had been proven in the world's markets.

Mike didn't just head a lot of different departments in his work at Drexel. He and his colleagues created what is today a major part of the structure of global finance based on their financial innovations in the 1970s. This structure - now taken for granted and taught in every business school - powered job growth in America for a quarter century and is now moving around the world through the efforts of the Milken Institute.

His most important work was financing entrepreneurs who had good ideas for building companies that became significant engines of job growth. Based on his studies during the 1960s and his practical experience in the 1970s, Mike was determined to focus, first, on cash flow rather than reported earnings; and second, to consider human capital part of the balance sheet. He changed entire industries where smaller players simply did not have access to capital until he provided it. In home building, which employs millions of people directly and through subcontracting, Milken financed KB Homes, now the largest company in the industry, as well as Toll Brothers, MDC Homes, Hovnanian Enterprises, Oriole Homes, U.S. Home and many others. These are companies that literally built the American Dream.

In entertainment, MGM, News Corp., Viacom and Time Warner were all Milken-financed. In the toy industry: Toys-R-Us, Mattel, Hasbro and LeapFrog. In hospitality: Hilton, Days Inn, Holiday Inn and others. Convenience stores include 7-11 (Southland Corp.) and Circle K.

Safeway is a company with 200,000 employees in almost 1,800 stores across the U.S. and Canada. Every one of those employees can thank Milken for helping build the company that provides their paychecks. His financing was crucial to Chrysler when they most needed it to stay in business and grow in the early 1980s. The cable television industry would not be in anywhere close to four-fifths of American homes if he hadn't financed several of the major companies. Occidental Petroleum wouldn't have jobs for its 8,000 current employees without Milken.

Cell phones are in just about everyone's pocket today. The industry started in the early 1980s when Milken financed a small company called McCaw Cellular Communications.

Another way to look at the impact Milken has had is to consider just one state. Nevada, the fastest-growing state in the nation, saw its economy kick-started by Milken's financing of its gaming industry, newspapers and homebuilders. The rule of thumb in the gaming industry is that every job created within the industry creates more than three additional jobs in the local economy. By that measure, his financing of MGM Mirage, Mandalay Resorts, Harrah's Entertainment and Park Place accounts for something like 600,000 jobs.

Milken was also a pioneer in providing access to capital for minorities and women. In the early 1980s, he received hate mail and even a death threat for financing African-American entrepreneurs like Reg Lewis. Before Milken, no woman had ever headed a publicly traded company that she had not inherited; Milken was the first to finance such a company.

Some of the other names among companies Milken financed include: AMC Entertainment; Bally's Manufacturing; Barnes & Noble; Beatrice; Cablevision; Caesars World; Calvin Klein; Chiquita Brands Int'l; Duracell; Filene's Basement; GAF Corp.; General Host Corp.; Kay Jewelers; Knoll Int'l; MCI; Medco; Mellon Bank; Metromedia; Philadelphia Electric; Playtex; Sunshine Mining; TCI; Uniroyal Goodrich; and Telemundo.

The effect of Milken's financing revolution - and the jobs that it created - are sometimes overlooked amid breathless accounts of "takeovers" by supposedly nefarious "raiders" during the 1980s. Read more about the actual effects of takeovers.