Titans of finance convened for a collective pep talk at the Milken Global Conference, telling each other that maybe the economic damage won’t be that bad after all, and that, anyway, there are deals to be done. “Stay calm and carry on,” KKR founder George Roberts told some of the 5,000 attendees of the star-studded gathering in Beverly Hills.
Under the theme, “Toward a Flourishing Future,” speakers scratched for silver linings, hidden opportunities and even higher purpose. “I think we do have the responsibility to transition certain aspects of our business to a broader set of the communities that we care about,” said Robert Smith of Vista Equity Partners, who famously paid off $34 million in student loan debt for 2019 graduates of Morehouse College.
While uncertainty over the Trump administration’s chaotic rollout of a global tariffs regime has frozen large capital expenditures, smaller firms have an opportunity to move ahead, said Gautam Bhandari of Miami-based I Squared Capital, an infrastructure investor. “Yes, inflation is upon us and maybe a slowdown will come, but that generally bears well for infrastructure because it’s a defensive asset,” Bhandari said.
Treasury Secretary Scott Bessent urged the audience to look past the turbulence and lean into a future of abundance. “US markets are antifragile,” Bessent said. “The entirety of our economic history can be distilled in just five words: ‘Up and to the right.’”
Rise of the rest
As many other investors wait and see, sovereign wealth funds and other investors from the Middle East are commanding rapt attention. The convergence of financing, energy and AI means the region is “taking over from Europe, in many ways, as one of the dominant parts of the world order,” said Citi’s Jane Fraser.
Likewise, India is a beneficiary of the diversification from China. “But that’s the icing for the cake. The cake is India itself and the domestic economy.” The US accounts for only about 11% of world trade. “The rest of the world isn’t standing still,” Fraser said. “It’s moving forward and changing some of the partnerships.”
Productivity gains – and job losses
AI, of course, came up on nearly every Milken panel. Vista Equity’s Smith noted that a billion knowledge workers worldwide account for about $40 trillion in salary, spending and impact. “All of those jobs are at risk at some degree, at some level, through artificial intelligence.”
Private equity firms deliver returns to investors by boosting performance and productivity, he said, “but at some point, the productivity of what we do will impact some broader economic employment dynamics.”
With Vista’s portfolio company Stats Perform, a provider of AI solutions for sports organizations, the firm supports courses at historically Black colleges and universities to provide hands-on instruction in using AI to create value in specific industries. “Part of our responsibility is to distribute knowledge, distribute capabilities,” Smith told the Milken crowd.
Boston Consulting Group’s Rich Lesser expects to see “enormous amount of individual asset displacement with AI,” as is already apparent in leading companies. “We will also see it opening up new ideas we haven’t had before, just like every generation of a technology revolution.”
Share the wealth
When Michael Milken tossed out a question about employee ownership, Jonathan Sokoloff of the $70 billion private equity firm Leonard Green & Partners knew what to emphasize. “We’ve been doing it for 30 years, and we do it because it’s good investing. It makes us more money. It makes our investors more money,” Sokoloff said.
In addition, thousands of employees experienced “a life-changing event of financial independence.” When Home Depot last year paid $18 billion in cash for SRS Distribution, a roofing materials distributor owned by Leonard Green since 2017, at least 9,000 employees shared in more than $3 billion in proceeds, Sokoloff said.
The firm sees smaller payouts to employees several times each year, he said. “Many of them are immigrants. They may be military veterans. They may be ex-incarcerated. And these are kind of blue-collar jobs where we give them a chance and make them stakeholders.”
Some of Leonard Green’s health care investments came in for criticism from a Senate panel earlier this year for putting “profits over people.” But Sokoloff finished with a flourish: “The American Dream is alive and well in private equity.”
Strengthening private markets
A lack of coordinated policy is deterring private investment from flowing to national priorities such as domestic manufacturing, technology and infrastructure. The Milken Institute Inclusive Capitalism program convened a research team to examine ways to unlock capital while democratizing access for everyday investors.
Among them: Lowering barriers for emerging managers by scaling catalytic capital programs such as the State Small Business Credit Initiative, created to support small businesses after the Covid crisis.
Other recommendations: Expand investor access to private markets, including through streamlining crowdfunding rules, and expanding liquidity by scaling secondary markets for private asset trading. Says Milken Institute advisor Calvin Cooper, “Let’s build a private market ecosystem that funds the new industrial economy in a way that works for all Americans.”
