Michael Milken — A Medical Research Innovator?

Ever since I read Den of Thieves two years ago, I thought that people like Mike Milken would be despised everywhere, by Wall Street, by the media, by the general public — He traded on insider information, he accumulated enough market power to inflate the junk bond prices, and many middle class who followed were left with worthless papers; he fostered corporate raids and destroyed many business. How can the public tolerate such a person?

I was so naive! My first surprise came from Liar’s Poker: Rising Through the Wreckage on Wall Street. Obviously, Michael Lewis did not think Milken as a criminal when he wrote “Liar’s Poker”. And in some sense, Michael Lewis thought that Milken spotted a good financial innovation opportunity (junk bond) that Solomon Brothers missed.

My second surprise came when I was listening to the radio. The radio broadcasted an ad for Wharton economic summit , where Milken is listed as the number one keynote speaker, even ahead of the finance professor Jeremy Siegel. I can’t help to look for the ads and see how they advertise the “junk bond king”. And to my surprise again, now he is “The Man Who Changed Medicine”! And obviously, his name is what attracts people to come to the summit.

Obviously, he has many followers, particularly from Wall Street. Everyone can have his/her own take on Milken’s past. I am fine with that. But from what time he has become a Medical Research Innovator ? By giving some money to some medical research center to get tax deduction? This will be an interesting path to be a medical research innovator 🙂

And what’s more interesting is that he will team up with Professor Jeremy Siegel, the author of The Future for Investors: Why the Tried and the True Triumph Over the Bold and the New. He “is a buy-and-hold kind of guy who predicts that an unprecedented wave of discovery and innovation will fuel economic growth in the U.S. and provide superior returns for investors who are patient.” What is his take on Milken’s junk bonds?

Should be an interesting speech (at least to me). But $499 a ticket, plus travel expense… no way for a deal hunter like me.

Do we want to play Liar’s Poker? Notes 1

I found two books listed most frequently as favorite books among PF bloggers — Liar’s Poker: Rising Through the Wreckage on Wall Street and A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing, Ninth Edition. I felt a bit embarrassed that I did not know these two books, though I had thought about getting a job in Wall Street. I decided to make up my ignorance.

I finally got the two books one month after I placed holds on them. By then Yannick and I got very busy with our work. So we decided to optimize our times — each read one and exchange reviews.

Yannick likes numbers, so he got the “Random Walk”. I am more fiction or biographic type, so I picked “Liar’s Poker”.

The first thing that struck me was the author’s comments on “economics”. He noted that, although most arrivals on Wall Street studied economics, the knowledge was never used – actually, any academic knowledge was frowned on by traders. Economics is not really a science, but rather a means by which investment bankers find potential candidates to hire.

This sounds like Michael Spence’s model of job market signaling. I always considere it a drawback in signaling game — Education is useless other than being a signal to the potential employer. Now Liar’s Poker confirmed this assumption with a real life example. I guess that this was one of the very few cases where the assumptions of an economics model hold true in reality. Unfortunately, instead of increasing my confidence in my economics education, it makes me even more disillusioned with the economics knowledge I got from PhD classes.

On the other hand, the book gave us a relief. As the book says, most millionaire traders started their trading business in their early 20’s. We had some sort of regret that we missed the opportunity to be there. Given that I have so many friends working in investment banking, I can’t (or do not want to) believe that the life in Wall Street is like the “jungle” the book described. However, I doubt that the way the IB sales traders and people make money has changed much. They consider it a success by deceiving the less-informed public and ripping off their clients. I do not think that Yannick will ever be able to do this. So this may not be the road for us anyway.

The book also talked about Michael Milken’s junk bond empire. It is interesting to see a different view on Michael Milken from Den of Thieves