In thousands of speeches, articles and interviews since 1969 (when he delivered his first speech on Wall Street), Mike's messages have been remarkably consistent. Rarely has he missed an opportunity to point out that human capital is the world's largest and most-important asset and that the best way to increase the value of that asset is through education and medical research.

Following is a very brief selection of quotations grouped by subject.

Human Capital

• "Where is society heading in the 21st century? The two largest sectors of the U.S. economy - health care and education - are poised to expand and become an even larger share of gross domestic product."
  
  
• "Any analysis of capital structure should recognize that most balance sheets are dramatically inaccurate because (with the exception of professional sports franchises) they fail to include the value of human capital."

• "In the 1920s, when automobiles became a huge industry, 60 percent of the cost of producing a car was in raw materials and energy. For today's computer chips, it's less than two percent of the cost. Brainpower has become the 'raw material' for building companies. This human capital, combined with the social capital of democracy, open markets and the rule of law - is the basis of a prosperous economy."

• "In financing growing companies, I always looked for human value that didn't appear on the balance sheet - the quality of management, especially its entrepreneurial drive. I saw that quality in executives like Bill McGowan of MCI, Bob Toll of Toll Brothers Homebuilders, cell-phone pioneer Craig McCaw and hundreds of others, including Steve Wynn, Reg Lewis, Ted Turner, Steve Ross, Rupert Murdoch and John Malone. These talented leaders had passion, vision and the ability to execute a strategy. Once they were given access to capital, they built businesses that became amazing engines of job creation and wealth."
  
  
• "There are only three ways for a country to build human capital: Increase knowledge and skills, improve the quality and length of life so people are more productive, or import people with specific abilities. Some countries have done this better than others. Consider the two former British colonies of Jamaica and Singapore. Back when I was in school in 1960, their economies were similar with a gross domestic product of about $2,200 per person (in current dollars). But they chose different paths to development. Jamaica centered its economy on agriculture and tourism and today has a per-capita GDP of about $5,500. Singapore, which developed its human and social capital and created a knowledge infrastructure, is a modern technology powerhouse with a GDP of more than $39,000 per person."
  
  
• "We should alter immigration restrictions that exclude many of the world's brightest and most-creative students, entrepreneurs, artists and scientists. Their contributions as citizens would create millions of new jobs without threatening American workers."

• "Tonight while we're sleeping, hundreds of people are going to risk their lives to sneak over the border of Mexico in search of a better life for their families. It's not much different from your ancestors who came to this country, took a chance, tried to make money and then sent over for other relatives to come. Someone didn't sprinkle some dust on this person that made them work hard after they hit this country."
  

• "Human capital is just as important in the non-profit sector as it is to businesses and nations. In the four decades of philanthropy that have paralleled my business career, I've found that the same principles apply whether you're providing access to capital to grow a business, creating a new paradigm for medical research, or pioneering innovative approaches to education: Empower the most talented people in each field and encourage them to pursue their passions."

• "Building human capital always creates value whether measured in lives saved, students inspired or jobs created. It always involves more than just writing checks. It takes an entrepreneurial approach that seeks out best practices and empowers people to change the world."
  
  
• "Financial technology alone has little meaning unless there is underlying value. In order to create jobs and real prosperity, financial technology must act on other factors; and none is more important than human capital."
  

Education

• "The future of our country is not found in our boardrooms, but in our classrooms."
  
  
• "We have a greater challenge than some other countries because we are truly a melting pot. It's our strength; but it's also our challenge; and you see both in our schools. We must ask both our educators and the business community to help prepare the nation for coming demographic changes when more than half of our citizens will have ancestors from Africa, Asia and Latin America."
  

• "All qualified citizens can attend our world-class universities with assistance from government Pell grants. We need equivalent access to excellence through Pell-type grants in K-12 programs and, even more importantly, in early childhood education."

• "Getting an idea around is as important as getting an idea."

• "The Milken Educator Awards have brought recognition and, I hope, even greater self-confidence and self-awareness to educators. At the Foundation, we want to help build a society where parents can exclaim with pride: "My son, my daughter, the educator."

• "Old-economy skills used to be good for a lifetime of work. But as technology dominates more job categories and the rate of technological change accelerates, skills must be renewed constantly. It took 65 years from the invention of the airplane until 25 percent of Americans had flown in one. The same level of consumer penetration was reached 30 years after video recorders first appeared. For the Internet, it took only seven years."
  
  
• "An asset that's far greater than financial capital is knowledge. Even if you lost all your money, with knowledge you can start over and do a lot. Ultimately, the strength of this country will be determined by how successfully we increase knowledge. We used to be the most educated nation on earth. But since 1960, other countries have leveled the playing field. I've traveled to more than 20 of those countries in recent years and I've seen some remarkable educational efforts. In South Korea, for example, middle-class parents spend 50 percent more on tutoring one child - just private tutoring beyond government-supplied public education - than they spend on housing. It's a similar story in China. In the long run, that's what will propel these nations ahead."
  
  
• "We look at education as an expense. It's an investment and, with the exception of basic sanitation, it is the best investment America can make. Our nation was built on democracy, freedom...and education."

• "By investing more of the nation's abundant resources in education, we can help assure the future of our democracy."
  

Medical Research and Health

• "As a physically fit role model, President Obama can provide leadership on the health and economic benefits of disease prevention through an active lifestyle and sensible nutrition. This will raise productivity and lower medical costs."
  
  
• "If the average weight of Americans simply returned to early 1990s levels, the reduction in chronic-disease costs would boost our economy annually by an estimated $1 trillion - at no cost to the government. And if we invested a small portion of that health dividend by doubling medical-research funding, the economic effect would be worth trillions more, in addition to the incalculable benefit of lives saved."
  
  
• "Clearly, we have not mobilized all possible resources to win the war on cancer. In 1995, on the eve of the 25th anniversary of that war, we are in danger of snatching defeat from the jaws of victory by becoming fatigued, unfocused and complacent."
  
  
• "Today there are an estimated 10 million cancer survivors just in America alone - men and women who in many cases have life expectancies measured in months, not years. Many would gladly enlist as foot soldiers in an effort to help cure a disease that in many cases will be genetically passed on to their children and grandchildren."
  
  
• "We have strived to leave our children a world devoid of war, yet more American lives will be lost in one year to cancer than were lost in all the wars of the 20th century. We have strived to leave our children with a country free from debt, yet we are burdening them with massive medical costs associated with an aging population. We have strived to leave our children with a world that celebrates and cherishes the sanctity of a single human life, yet we are unwilling to make the financial and moral commitments necessary to lift the burden of cancer from the next generation. We have created a world where one in five will have their lives cut short by cancer. This is too great a burden to leave to our children and grandchildren. For those children and the children of future generations, let us find a cure for cancer. Let us do it now. Let us choose life."
  
  
• "The federal investment in finding cures for cancer - $3 billion annually [as of 1999] - is less than ... zero ... point ... zero ... zero ... zero ... four ... percent of our gross domestic product, or about one-seventh of what Americans spend on beauty products."
  
  
• "Is there any organization that would spend 35 times more money to deal with the effects of a problem than it would to solve the problem? It makes no sense in the private sector, and, with current concerns about spending rates and budget caps, it should make no sense in government."
  
  
• "An education leader once said, 'If you think education is expensive, try ignorance.' I would paraphrase that as, 'If you think cancer research is expensive, try paying for continued treatment of 100 million Americans.'"
  
  
• "Medical research spending from all public and private sources in America totals about 60 cents a day per person - less than the price of a newspaper. Yet we know that the returns on investments in research are prodigious. But overcoming disease requires more than extra dollars. After 35 years of involvement in supporting research, I'm convinced we can improve the process of medical discovery and treatment. The choice is ours: We can sit back and wait for more cures and better treatments, or we can marshal our resources to solve medical problems sooner and save more lives. Maybe yours."
  
  
• "Since 1938, our nation chose to devote 100 times more money to nuclear-weapons development than it has to cancer research - six trillion dollars vs. $60 billion. It is not for me to say that such a balance of priorities is misplaced. Military spending has helped preserve the freedoms we all cherish. But I believe [we should] invest more of our future resources in the life-extending and life-saving research programs that offer hope to so many around the world."
  

• ""In a 1995 speech at the National Cancer Summit, I proposed a ten-point action program to speed up the War on Cancer. Some of these points and other similar proposals have been incorporated in the 'Roadmap for Medical Research' announced by the National Institutes of Health. But much more needs to be done to optimize the infrastructure of medical research and treatment."

• "An American man still has a one-in-two chance of developing cancer; a woman's chances are one in three. Alzheimer's, diabetes, kidney diseases, AIDS and other serious conditions continue to devastate individuals and families. Everyone focused on finding better treatments and cures sincerely wants to strike down deadly conditions faster. The problem is that they face a maze of conflicting incentives, often-outdated regulations and other roadblocks to progress."

• "We Americans have a tradition of rising to a challenge. We fought for and won our independence. Later, when the Civil War tore the country apart, we bound up our wounds and created a stronger nation. And when the Soviet Union launched Sputnik, the first man-made earth satellite, we responded by putting astronauts on the moon in little more than a decade. But when it comes to cancer, there is no Sputnik, no single shocking event that galvanizes our response. Cancer is so common that our society has come to think of it as almost normal. Fortunately, 'normal' can change over time. When I was a child, the four-minute mile was considered a nearly impossible achievement. Yet once Roger Bannister, a young medical student, broke through that psychological barrier, 16 other runners beat the four-minute 'limit' within a year."

• "More than 35 years after the National Cancer Act, we've made some important progress. Cancer patients like Bob Dole, John Kerry and John McCain have run for President and seven-time Tour-de-France winner Lance Armstrong has shown that even metastasized cancer need not be a barrier to great achievement. Yet as a society, we can do more, much more. For the first time in history, we hold the potential of eliminating cancer's burden. It will take a monumental effort, but the rewards will benefit all future generations."

• "More baby boomers are asking themselves, why retire? It's a cliché to say that 60 is the new 40, but it has some biological and psychological validity. Advanced biomedical research is leading to continued progress against cancer, heart disease, arthritis, dementia and other conditions that have forced people out of the workforce before they wanted to quit. In the future, aging workers will be healthier and will use broadband technology to live and work from anywhere at the increasing proportion of jobs that involve knowledge rather than physical labor. They'll spend more years earning income, often in multiple careers, instead of selling assets."

• "More than just the length of life, the number of healthy years will increase. When people are vibrant into their 80s and 90s, 65 will evolve from the traditional retirement age to a mid-career milestone for those who choose to keep working. Who wants to retire when you have fulfilling work, when you earn a good income and when you feel great?"
  

• "Biotechnology researchers work in a field of mind-boggling complexity that requires years of rigorous training. They can tell you how hard it is to make even small advances against major diseases. So assuming you don't have an advanced scientific degree, you might think there's nothing you can do to achieve the kind of medical breakthroughs that would eliminate half the diabetes cases, prevent one of every five cancer deaths, and save trillions of dollars. Anyone who developed a pill that could do that would win a Nobel Prize. You have that pill. It's called lifestyle choice. And it's free."
  

• "America woke up 50 years ago when Sputnik shocked us into action. We need similar resolve today so chronic diseases don't undermine our economy from within the way the Soviet challenge of the 1950s threatened our security from without. Each of us can help by taking reasonable steps to reduce our personal chronic-disease risks. Progress against the preventable cost of these diseases will free up the human, social and financial capital we need to fund crucial research and provide high-quality healthcare to all Americans."
  
  
• "Economists' estimates of cancer's financial impact - more than $50 trillion in the U.S. - probably understate the real productivity hit because they don't account for the lost productivity of family members and caregivers. These estimates also fail to account for the effect on corporate earnings. Consider Time-Warner, whose chairman, Steve Ross, died from cancer in 1993. Had Steve lived, Time-Warner would be a very different company today. This is true of many corporations, non-profits and even governments."

• "The greatest achievement of the 20th century was life extension. The doubling of life expectancy on the planet between 1900 and 2000 added greatly to economic growth. But today, these gains are threatened by the obesity epidemic. Obesity is costing America $1 trillion a year through its impact on chronic diseases. If we could just return to the nation's average weight in 1990, we could pay for insurance for all the uninsured and double the research budget of the National Institutes of Health. That would save millions of lives."

• "Obviously, we've lost a tremendous amount of financial capital [in 2008]. But the most important asset is your health. I was given 12 months to live 15 years ago. So I'm definitely the happiest guy in this room right now."
  

Philanthropy

• "It's hard to imagine when you're young how you accumulate wealth. My experience indicates that most people who've accumulated a great deal of wealth haven't had that as their goal at all. Wealth is only a by-product, not the original motivation."
  

• "There are six keys to meeting philanthropy's challenge:
  

  	Follow your passion.
  	Get personally involved.
  	Think big. You can change the world.
  	Foster teamwork.
  	Fight the zero-sum-game mentality. Foundations don't 'spend' money on grants. They invest in society to produce a greater return.
  	Transfer skills, not just money."

Business, Finance and Society

• "The best investor is a social scientist."
  
  
• "Amid all the changes since I first went to Wall Street 40 years ago, basic investing principles have not changed at all. Attractive opportunities still await those who do careful research; capital structure still matters; and the best investor is a social scientist who analyses markets from both macro and micro views. The macro view sees the 21st century defined by global competition for the world's most valuable asset, human capital. Nations build this by strengthening education, healthcare, access to scientific knowledge, opportunities for women and incentives that attract skilled immigrants."
  

• "The United States is no longer the sun. We're one of the planets that make up the solar system. Unfortunately, when you go to a U.S. business school today, 90 percent of the courses still relate to the domestic U.S. market and what's going on in the U.S. Yet the lives of most of these students are going to be most influenced by what's going on outside the United States."
  
  
• "We have a fear in America that led to [1980s] legislation banning 'foreigners' from buying farmland. When the farmers in Iowa and Nebraska wanted to sell their farmland at $5,000 an acre, they couldn't sell it, because it became illegal to sell it to the people who wanted to buy it. The result was that the farmers and the farm-owned banks lost more than $100 billion over the next ten years. These rules or regulations all initiated to do good frequently wind up having the opposite effect."

• "The 1980s were characterized by what some economists call the 'democratization of capital' - making funds available to individuals previously denied access to our nation's capital markets. For the first time in our nation's history, women, minorities and others with ability could pursue new ventures and establish themselves in America's economic mainstream."
  

• "Small- and mid-sized companies in this country historically have been responsible for creating the overwhelming majority of new jobs in the private sector. One of the most-common misconceptions about our private enterprise system is that large companies, such as the Fortune 500, are integral to the process of job creation in this country. The truth is quite the opposite."

• "We cannot have a strong private enterprise system without a strong society - we are all affected by the success, or failure, of each other."
  
  
• "Doing good is good business."

• "There is no institution or industry in this country that can operate independently of federal, state or local government."

• "Social capital includes universal education and health care, police and fire protection, religious freedom, a sense of neighborhood bonds and widely available cultural resources. But it also includes the incentives for risk taking inherent in established property rights, protection of creditors, regulatory continuity, transparent markets and rigorous financial reporting standards."

• "The myth of safety in government and large-company securities is one of many myths that emerge from a skewed frame of reference. Think back to your grade-school geography lessons. There was that big map of the world on the wall. Africa and South America were huge, dwarfing Europe; and the Soviet Union was a colossus that spanned more than a dozen time zones, making the United States look puny by comparison. No wonder we feared the Soviets and built fallout shelters! But if we had looked at the world in economic terms, the Russian bear would have shrunk drastically. In fact, the gross domestic product of Russia [in 1999] approximates the economic output of Maryland and New Jersey."

• "I predict three revolutions in the 21st century: the global democratization of capital; the democratization of health care to the remotest parts of the world; and nearly universal access to knowledge. Scientists say there are more stars in the universe than grains of sand on our tiny planet. As these three revolutions take hold, perhaps the opportunity to contemplate such humbling facts will give our 21st-century leaders the perspective they need to leave behind the confrontational attitudes that have plagued mankind until now."

• "The opening of our capital markets to people of broader backgrounds since 1980 has allowed far more individuals with a dream to test themselves in the marketplace. That has strengthened our economy, to be sure. Equally as important, it has strengthened our democracy."

• "The real future value of U.S. assets won't be determined by retirements, but by policy decisions on education, taxation, regulation, immigration, international investment and the environment."

• "When I went off to college at Berkeley in 1964, I planned to major in math and science. But the Watts riot the following summer in my hometown of Los Angeles changed my view of the world and my choice of a major. I came to realize that civil rights wasn't just about where you could sit on a bus; it also meant equal opportunity to pursue a dream, to own and build a business - the right to succeed (as well as the right to fail and try again). Many of the people in Watts felt excluded from this dream."
  
  
• "I believe major cultural changes are coming. Today, Americans live in the world's biggest houses. In the future, we will live in smaller houses. But I don't believe that's a negative trend if we shift our priorities from houses to education and health. Wouldn't you rather live in a smaller house with better-educated kids who are cancer-free than live in a big house among ignorance and disease?"
  
  
• "Today, in 2008, it's more important than ever that people on the lowest rungs of the economic ladder feel they're part of the American dream. They need access to capital. The promise of capitalism is that you'll have that access based on your ability."
  
  
• "The accessibility of capital markets has grown continuously since 1974. Businesses are not as dependent on banks, which now own less than a third of the loans they originate."
  
  
• "One of the real challenges for Russia - unlike China, India or Brazil - is that for the majority of students here the number-one goal is to work for the government. When entrepreneurship garners the sort of respect Russians usually save for great writers or scientists, there will be a flood of capital from all parts of the world coming to Russia."
  
  
• "It is important to understand global economic trends. Some claim that it is impossible to see the future. Yet we know as a fact that the majority of the world's economic output a few decades in the future will come from people who have already been born. And most of those people live in Asia. According to projections by the Milken Institute, nearly 60 percent of the world economy will be based in Asia by mid-century - in large part because of a substantial increase in access to modern capital markets. Asia will also be home to an estimated 80 percent of the world's scientists. Depending on your viewpoint, you may consider those facts alarming or simply indications of where to invest."
  
  
• "What other trends do we know? We know that the unrelenting march of technology is producing virtually unlimited data storage at a cost near zero; and that we can transmit the data at unimaginably high speeds anywhere in the world without regard to the expense. Consider how this affects different industries. Real estate, for instance. Not long ago, the most-valuable real estate in the world was in places like London, Moscow, New York, Dubai and Beverly Hills. No more. Today, the most-valuable real estate is found on the web pages of companies like Google, Facebook, Alibaba, eBay, Amazon, Baidu and YouTube.
  

Finance

• "Book value alone is not usually a good measure of the future."
  
  
• "There are very few businesses in the world that can survive through multiple business cycles where you get to keep all the losses and none of the profits. So we're seeing [1987] that this thing - billions and billions in dollars of mortgage loans that are prepayable at any time - has come home to roost."
  
  
• "The central principle in choosing financial structures is the rule of Ecclesiastes: 'For every thing there is a season, and a time for every purpose under heaven.'As time and seasons change, companies must seek different means of financing to meet their needs."
  

• "Debt isn't good. Debt isn't bad. For some companies, close to zero debt is too much leverage. For other companies, nearly 100 percent much higher levels of debt can easily be absorbed."
  
  
• "The right time for a company to finance its growth is not when it needs capital, but rather when the market is most receptive to providing capital."

• "Finance is a craft that can become an art with skill and proper application."

• "A true test of any financial executive is to be able to finance a company in tough times - not just in good times."

• "Proper management of a corporate balance sheet is like playing the piano with both hands: You must be able to manage both the right side and the left side."

• "Back in the 1960s, a small number of money-center banks and large insurance companies pretty much determined who got access to U.S. financial capital. Their customers were large, established corporations - companies with history - and capital was allocated to these 800 or so 'investment grade' firms based on a look in the rear-view mirror. Tens of thousands of smaller enterprises - companies with prospects - scrambled for crumbs at the tables of the capital club. Wall Street seemed more interested in financing the past than the future."
  

• "Over the last third of the 20th century, control of capital in America shifted away from private institutions and toward public markets, making the process of financing growth more forward-looking and democratic."
  

• "The multiplier effect of financial technology suggests a theory of prosperity that I developed in the 1960s. It can be stated as a simple formula:

  
  "Prosperity equals the collective value of financial technologies multiplied by the total of human capital, social capital and real assets."

• "Most people approach corporate finance the way scientists deal with problems in the physical world: Plug in the right formula and you'll come up with the solution. But as any surgeon will tell you, at the very highest levels, even the most technical pursuit becomes an art. In the same way that artists select from an infinite palette of colors, financiers choose from a broad palette to build the correct capital structure for a business. As conditions change over time, they modify the structure to keep the business strong."

• "Just as you can't make real money by putting a dollar bill on a copying machine, you can't successfully copy the financing technique that once worked for a particular company and transfer it to another time or another company. That's why I have always said that finance is a continuum with infinite variations and hybrids. It takes deep understanding of a company, its environment, and the financing tools available to build sustainable growth that will reward shareholders and create jobs."
  
  
• "Why is book value not important? Let's look at General Motors. At the beginning of this decade [1990], GM had historical book equity of $37 billion and market value of about $28.8 billion, less than 80% of book value. And they earned $900 million in the second quarter of 1990. That was followed by 10 consecutive quarters of losses, taking their book value to $6.6 billion. If you knew then that GM's book value in the next three years was going to go from $37 billion to $6.6 billion, would you have bought the stock? My guess is most of you would not have estimated today's [1993] market value would be $35 billion, more than five times book. But that $6.6 billion book value is meaningless because their unfunded pension liability is more than $20 billion. If they decide to take a write-off for unfunded pensions, they will have negative book value. One of our largest industrial enterprises with enormous market value now has no book value and no net worth. So what should you pay for things? Beauty is in the eye of the beholder, but the marketplace will later decide whether your eye was a good one."
  
  
• "Over the past four decades, many companies have struggled with the wrong capital structures. During cycles of credit expansion, they've often failed to build enough liquidity to survive the inevitable contractions. Especially vulnerable are enterprises with unpredictable revenue streams that end up with too much debt during business slowdowns. It happened 40 years ago, it happened 20 years ago, and it's happening again [in 2009]."



• "Issuing new equity can of course depress a stock's value in two ways: It increases the supply, thus lowering the price; and it "signals" that management thinks the stock price is high relative to its true value. Conversely, a company that repurchases some of its own stock signals an undervalued stock. Buying stock back, the theory goes, will reduce the supply and increase the price. Dozens of finance students have earned Ph.D.s by describing such signaling dynamics. But history has shown that both theories about lowering and raising stock prices are wrong with regard to deleveraging by companies that are seen as credit risks."



• "When a company uses the proceeds from issuance of stock or an equity-linked security to deleverage by paying off debt, the perception of credit risk declines and the stock price generally rises."



• "It doesn't matter whether a company is big or small. Capital structure matters. It always has and always will."
  

Leverage

• "When I was on Wall Street, we rarely had more than 1:1 leverage, and the highest I recall in my career was 4:1. The idea of leveraging 30:1 or more, as many financial institutions did recently, is not a business."
  
  
• "If the government is going to put money in financial institutions, it should require them to de-leverage over time."
  
  
• "There are only half a dozen U.S. companies with a triple-A credit rating. Yet, in 2007, rating agencies gave almost 1,300 financial instruments triple-A ratings. They never legitimately deserved a triple-A rating, but that rating enabled the leverage that created the problem. People got comfortable with the rating rather than doing their own homework on credit quality. In medical research, you do your homework - you look at tests that show measurable results. The history of credit has demonstrated that the rating agencies do a good job within an industry, but a poor job across industries."

Sovereign Debt

• "One of the great things about making loans to business leaders in the United States is that when there is a change of management, the new management has to recognize the liabilities of the old management. Sometimes when you make loans to sovereign countries, the new management does not recognize the liabilities of the old management."
  
  
• "The best credit by far, history has shown, has been the private company. Sovereign countries have defaulted 30 times as often as private companies, both domestically and foreign. Individuals default five times as often as private companies."
  

High-Yield Bonds

• "The quality of investment-grade securities can deteriorate over time. With lower-rated securities, the opposite is often true."
  
  
• "If you live in Wyoming, Alaska, New Hampshire or Vermont, don't look for an investment-grade company headquartered in your state. You won't find one there. And if you don't count the local public utilities, you can add another 11 states - Hawaii, Kansas, Maine, Montana, South Carolina, New Mexico, Nevada, South Dakota, North Dakota, West Virginia and Mississippi."
  
  
• "Junk bonds? Perhaps there's a better name for the bonds that fuel 95 percent of American business. Perhaps something like Corporate Growth Bonds. Or State Development Bonds. Or Job Creation Bonds."
  
  
• "If you read the papers [in 1988], you would assume 130 percent of all money raised was used in takeovers. Four banks in New York alone have probably loaned seven times more money for hostile takeovers than the total market for non-investment grade debt."
  
  
• "Most of the financial instruments that have been created in the [1970s and 1980s] have strengthened companies. Ninety-five percent of the high-yield business itself was created to finance growth, not takeovers, and 95 percent of it does just that."
  
  
• "Much of the controversy over high-yield securities centers on risk. But history demonstrates that corporate borrowers are far better creditors than countries or consumers. And empirical data compiled in numerous academic studies show that the yield premium on low-rated corporate debt has greatly exceeded actual credit risk throughout this century. That includes the Great Depression and the turbulent business climate of the 1970s and 1980s, including recessions and unprecedented interest-rate volatility."

• "Despite their superior performance, high-yield bonds are seldom mentioned without pejoratives such as 'non-investment-grade,' 'speculative' or 'junk.' While these designations are more emotional than descriptive, they provide a definite advantage to investors. By creating a false perception of risk, they increase the returns investors receive."

• "During a company's innovation and growth phase, it's natural for its debt to be rated below-investment-grade. Many of America's largest corporations started out as high-yield firms. Even the United States of America had to issue high-yield debt in its early years, when Alexander Hamilton was Secretary of the Treasury."

• "I've always found 'junk' a peculiar term to use for virtually the entire body of American business outside of a small, elite group. Firms that have not achieved an investment-grade label are rated as 'junk.' Yet virtually all net new jobs come from such firms."
  

• "We are no longer an industrial society; we are an information-services society. The future of America does not lie in factories; it lies in our classrooms. The scarce resource in our society is not money but people. But there's a lot of confusion in our society. In 1989, the House of Representatives passed a bill that made it illegal for savings and loan institutions to buy the debt of non-investment-grade companies. That means it was illegal to buy the debt of any company headed by a black American, a Hispanic or a woman."
  
  
• "Through the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) in 1989, it became illegal for savings and loans to lend money to small- and mid-sized businesses because they were labeled 'junk.' I consider much of this legislative overreaction to the economic events of the 1980s to be 'neutron' legislation - it left the office buildings standing, but eliminated the jobs that would have kept people working inside - and America paid the price."
  

• "More than 1,000,000 jobs have been added to our economy in the 1980s by only 1,200 companies issuing high-yield bonds that have taken ideas and enterprise and put them to work."

• "People often say to me, 'Well, I'm really not into junk bonds.' I'm not into junk bonds either. I've never been into junk bonds. I've been into people. I've always said that the best investor is a social scientist. People are the scarce resource. It's not buildings, it's not printing presses and it's not factories that are the scarce resource."
  
  
• "For every company rated investment-grade, there are at least 10,000 non-investment-grade businesses. At any time in history, these kinds of smaller companies have the potential to become the large enterprises of the future. Some people called such companies 'junk' because their debt didn't carry a high-quality rating. But I never believed that. These are the businesses that create almost all new jobs. I've always believed that access to capital for entrepreneurial ventures should be based on ability, not who your parents were, your banking connections, your religion or your race."

Risk

• "All investments have risk."
  
  
• "All of us, particularly as we get older, try to eliminate risk from our lives. In the United States, as we've matured as a nation, we constantly have attempted to eliminate risk. We want the government to take care of various things for us, protect us from changes in the weather, from interest rate changes, from unemployment, etc. The sad thing about risk is that when you eliminate risk you also eliminate the future."
  

• "The past is always triple-A. We can all remember what the past was. But if we try to make the future triple-A, we have no future. The future is always single-B."

2008-2009 Financial Crisis

• "Recently, I was reading a book that contained the following sentence: 'Real estate prices collapsed, credit dried up, and house building stopped.' Sound familiar? Actually, that was written about the U.S. market in 1792 - during the administration of the first American President, George Washington. And it reminds us that current market events are part of a periodic cycle. The kind of disruption we're experiencing today has happened before and it will surely happen again."
  
  
• "Why are we in this financial crisis? There are several reasons, but two issues have arisen periodically over the past 200 years. One is credit ratings, which don't necessarily reflect credit risk accurately. A second issue is the false belief that you can build a successful financial business through leverage instead of through unleveraged spreads."
  
  
• "There are only half a dozen U.S. companies with a triple-A credit rating. Yet, in 2007, rating agencies gave almost 1,300 financial instruments triple-A ratings. They never legitimately deserved triple-A ratings, but that rating enabled the leverage that created the problem. People got comfortable with the rating rather than doing their own homework on credit quality."
  
  
• "A few brief points about credit:
  
  

  1.	Credit is what counts, not leverage. If you're leveraged eight or 10 to one in an asset class that declines by five to 10 percent, you don't have staying power in a mark-to-market world.
  2.	Most loans to real estate are not - and never have been - investment grade. They carry a great deal of credit risk.
  3.	Interest rates are never predictable. The idea of borrowing short and lending long is simply not a business.
  4.	Rating is not credit. Long-term ratings have not been a good predictor of credit quality among different sectors of the world economy. So you shouldn't invest based on ratings.
  5.	Sovereign and government debt is, for the most part, not investment grade, particularly in emerging nations. Throughout history, governments regularly defaulted on their debts. Those countries that didn't default often hyper-inflated their currencies, which had a similar effect.
  6.	The value of debt securities is the underpinning of all capital markets. As the relative yield on debt goes up, the value of equities goes down. This is the best independent verification of value in any system."

  
  

• "We've been through some difficult times this year [2008]. But we've suffered shocks before. One of the biggest shocks America ever faced was the Soviet Union's launch of Sputnik in 1957. The headlines warned that we were losing the space race. Yet that shock stimulated great positive changes: the creation of NASA and DARPA (which led to the Internet) and a renewed emphasis on teaching math and science. I was a kid then and I remember how it became cool to be a physicist or a mathematician. I'm convinced that positive change will emerge from this latest crisis."
  
  
• "I hope the Obama Administration will refocus our efforts to deploy financial capital that sustains employment and helps people who want to keep their homes. With access to capital, the small and medium-sized businesses that create virtually all jobs can restore confidence in the American dream based on ability. And a temporary program to pay down mortgage interest rates through federal subsidies to lenders - with a required pass-through to qualified borrowers - will help stabilize the housing market while stimulating the economy."
  

• "Recent events in world financial markets, while dramatic, are not indicative of long-term trends. The turmoil will subside."



• "The current recession started in real estate, just as in 1974. Back then, many real-estate investment trusts lost as much as 90% of their value in less than a year because they were too highly leveraged and too dependent on commercial paper at a time when interest rates were doubling. This time around it was a combination of excessive leverage in real-estate-related financial instruments, a serious lowering of underwriting standards, and ratings that bore little relationship to reality. The experience of both periods highlights two fallacies that seem to recur in 20-year cycles: that any loan to real estate is a good loan, and that property values always rise. Fact: Over the past 120 years, home prices have declined about 40% of the time."



• "History isn't a sine wave of endlessly repeated patterns. It's more like a helix that brings similar events around in a different orbit. But what we see today does echo the 1970s, as companies use the capital markets to push out debt maturities and pay off loans. That gives them breathing room and provides hope that history will repeat itself in a strong economic recovery."



• "Similarities between human and economic medicine are revealing. Grave illness is often more life-threatening when it follows years of bad habits - overeating, drinking to excess, failing to exercise, and abusing substances that create dependence. The recent economic boom reflected a similar lack of discipline - overindulging on credit, leveraging assets to excess, failing to maintain enough equity in the capital structure, and disregarding the consequences of dependence on foreign oil."



• "When doctors tell patients to adopt healthier habits following a heart attack, the patients have no one to blame but themselves if they fail to comply. And when markets tell companies it's time to deleverage following an economic downturn, the companies have no one to blame but themselves if they fail to change their balance sheets."



• "Consider someone rushed into an emergency room in severe cardiac distress. After starting acute life-support measures, doctors still apply the rule stated by Galen of Pergamum more than 1,800 years ago: primum non nocere, or "First, do no harm." Treatment interventions are selected carefully from a battery of technologies and potent drugs while recognizing that any one of them, or a combination, could hurt the patient if misapplied or given in the wrong dosage. Economic interventions require no less care."



• "When the body begins to recover, doctors gradually withdraw external support and make sure the patient doesn't become addicted to medication. Our economic doctors should permit America's uniquely effective immune system to take over as companies and financial institutions deleverage their balance sheets. With people and with capitalism, the tincture of time is often the best medicine."
  
  
• "Properly applied and regulated, the market innovations of the 1970s disperse risk and create jobs. The disruption of the past two years [2007-2009] was caused by other factors, including unrealistic ratings that failed to reflect underlying credit risk, government encouragement of questionable investments, flawed underwriting practices and deployment of excessive leverage by financial managers who did not see the need for credit research."
  
  
• "Markets' future health requires investors to avoid errors that prolong and deepen global downturns. These include inaccurate assumptions that loans against real estate are high-quality assets, interest-rate movements can be predicted, capital structure has little effect on a company's value, emerging-market sovereign debt is without risk and high leverage is best for maximizing profit."
  
  
• "If we are to keep from repeating mistakes that exacerbate boom-and-bust cycles, we will have to define the lessons of history more accurately. The ongoing strength of capitalism depends on it."
  
  
• "If the structure of a loan lacks value, no amount of repackaging or changing its form will improve it. This fact was forgotten by some financial managers before the recent market downturn."
  
  
• "Even as we emerge from this crisis period, it is important to remember the human impact of the downturn. Financial recovery does not automatically translate into a jobs recovery. Hundreds of millions of people worldwide suffered because of a misallocation of capital. I believe now, just as I did 40 years ago, that the focus of all nations should be on providing access to capital to the small and medium-sized businesses that are best able to create a jobs recovery."