Where Davos meets Disney: 8 Big Questions from the Milken Conference in L.A.?

Its walls whisper scandal. 

It’s where JFK met secretly with Marilyn Monroe. Where his defeated rival famously declared, “You won’t have Nixon to kick around anymore.” And in 2012, it’s where Whitney Houston tragically died. 

The Beverly Hills Hilton may not be the ideal place to discuss the Future of Humankind, but that theme was all over the legendary hotel last week as it played host to the Milken Institute’s annual Global Conference. 

On the fringes of Hollywood, MI Global is where Davos meets Disney. 

Al Gore, Jacob Lew, Lindsey Graham, Steve Schwarzman, Nobel laureate Elizabeth Blackburn, Cher and Kobe Bryant were all on the bill, as was the effervescent host, Michael Milken — inventor of the junk bond, convicted felon, rehabilitated financier and philanthropist. 

(Yes, the conference is that male; three-quarters of the panelists at the three-day event were men.) 

Here are 8 questions I came away asking: 

1. Can China save the world from economic stagnation? 

It may seem odd for a roomful of capitalists to turn to the world’s largest Communist party for hope, but it is 2016. Stranger things are unfolding in America. 

Right now, the US economy is towing the world, but that may not last. The Boomers are hunkering down and there’s little appetite for more public debt. That leaves China as the best hope for growth for the rest of the decade. 

After a terrible back half to 2015, the Chinese economy has found its footing, financial markets are strengthening, and its central bank didn’t need to blow its stash of foreign exchanges reserves to get through the winter. China’s reserves are down from a 2015 high of $4 trillion to about $3.2 trillion. 

That means the government is in a good position to borrow or print money, and stimulate. And there’s still plenty of infrastructure, led by the Silk Road project, to build. 

The world is waiting to see China take the lead. 

2. Can China defuse its demographic time bomb? 

Financial engineering is one thing. Social engineering is quite another, and Beijing needs to do that on two fronts. 

First, it has to change a parenting culture from one child to two. The Chinese have 14 million babies a year, compared to India’s 25 million. And while the government wants to get that up to 16 million, there’s not enough women — thank you, one-child policy — to make it happen. 

At the other end of the demographic rainbow, older Chinese continue to save like no one else, stashing away 40 per cent of their income because they still lack faith in the government to care for them. That’s not sustainable. The Xi regime needs to find ways to get older Chinese to both spend and invest. 

3. Will the new age of volatility capsize emerging markets? 

While Rodeo Drive sparkles, the real jewels of the 21st century are scattered across emerging markets. They have 90 per cent of the world’s population under the age of 30 — and 157 of the Fortune 500. 

After a shaky 2015, capital is shifting back to those markets. Even Argentina is out of the doghouse, though not Brazil. Given slow-growth forecasts for the West, investors will continue to hunt the exotic edges of the world for opportunity. 

Sounds like the BRIC boom of a decade ago. What’s different this time? Low, low rates. In this environment, volatility rules— which means billions will ebb and flow by the day in the very countries that don’t have the political stability to cope. 

Mohamed el-Erian, one of the smartest economists around, believes emerging markets will account of the best and worst performances in the years ahead — but not a lot in the middle. 

4. Are we in for a decade of deglobalization? 

On the day Donald J. Trump secured his place on the presidential ballot, a couple of establishment veterans — Democrat Evan Bayh and Republican Eric Cantor — shook their heads in wonder as their worlds turned upside down. It wasn’t just Trumpism that shocked; it was the sound of America’s doors closing. 

The pols agreed that regardless of who wins in November, the US will be less focused on the broader world. 

On both sides of the House, Senators and Congressmen up for re-election in 2016 and 2018 will stay away from free trade, and talk tough on immigration and foreign policy. 

The same might be said of Britain, whether it brexits or not. Spain’s fractured parliament, France’s surging nationalists and Germany’s chastened Angela Merkel add to the narrative of inwardness. 

After the financial crisis, strong political leadership resisted a push for protectionism. Nearly a decade later, the Trans Pacific Partnership looks like it won’t survive this US political cycle, and has little chance of getting through the next administration without significant reforms. 

5. Are the black hats winning the Artificial Intelligence race? 

The rise of the robots is a common theme in 2016. There’s so much money splashing around AI that universities can barely hold on to their PhD talent. Stanford lost its core team to the private sector, while Harvard, Chicago and other schools are in the hunt for fresh talent. So much so that their competition — Facebook and Google — has been dubbed the new AI-vy League. 

Digital firms have the money; they also have the motherlode of data, which is what every math geek craves. (The going rate for AI academics is US$400,000, plus stock options.) The AI race is even more intense in China, where labour shortages are forcing firms to ramp up their efficiencies in a hurry. 

But capitalists aren’t the real dark hats of AI; those belong to the math maniacs of Russia, Iran, North Korea and the basement lab next door. For every advance Facebook or the US military makes, someone somewhere is using troves of data to train super computers to counter-strike. 

One German executive said his firm’s greatest concern is a malicious hacker using AI to access its data and take over its chemical facilities. The firm’s leaders are confident they can contain human hacking, but they’re not so sure they can stop a super-computer from learning to hack their super-computer. 

6. How many teenagers will join ISIL this year? 

Speaking of malicious forces, the Islamic State’s mastery of YouTube will be recorded as one of the great media feats of the early 21st century. The jihadists may be losing on the ground, but they’re winning the air war. Thanks to their propaganda, the self-styled Caliphate has attracted 40,000 foreign fighters from 110 countries. Amid the droves of young men arriving from every corner of the world to wage war: 6,000 from Tunisia, once the poster child of the Arab Spring. 

Sure, the Western-backed alliance has taken back half of ISIL’s territory, and seems to have key centres like Mosul contained. But the movement is simply popping up elsewhere. This year it’s Libya. Next year? Who knows. 

The Pentagon advisers say their best hope is to keep the young men, once they’re in the region, from getting out. No one likes the term “ring fence,” but it’s sounding like one. No one likes the expression “30-year war” either. But it’s sounding like that, too.

7. Will the campus revolution begin before it’s too late? 

Post-secondary education in the U.S. is the greatest in the world, and it’s in crisis. (Hello, Bernie Sanders.) First, there’s the cost. Since 2000, in-state tuition has gone up 66 per cent, in large part to offset lost revenue that states diverted to health care to cope with federal cuts. Second, there’s the growing demand for science, technology, engineering and math skills — the so-called STEM stream — that not enough schools are offering. Third, there’s a lack of experiential learning for students confined to a campus for four years, as if they were preparing to work for Ben Franklin. 

Here’s an indictment: Siemens now hires only 10 per cent of its U.S. recruits from campuses. The rest come with a bit (or a lot) of work experience. The company has tried to promote apprenticeship models in its factories but is still struggling to get American schools to play ball. 

And now, a new concern: the next generation of American students will be unable to afford the tuitions colleges are charging. In the majority of U.S. counties where population is growing above the national average, household incomes are below the national average. 

8. As for the gender revolution, how does 2116 sound? 

It’s astonishing that 50 years after the sexual revolution, America still faces a significant gender challenge. In business, according to McKinsey & Co., it will take another 100 years to reach parity in the C-Suite, and 25 years across executive ranks. The numbers are worse when you look at women in lines of business, rather than staff functions such as legal, marketing, finance and human resources. And in politics, there are still 10 men for every 3 women.

With so few women calling the shots, everyone suffers. There’s the creative cost, when half the population is shut out of discussions and decisions. There’s a corporate cost, as companies with gender-imbalanced executive teams tend to underperform balanced teams by double-digits. And there’s the economic cost — pegged at $28 trillion. That’s the value of the U.S. and Chinese economies combined, lost to the world because so many millions of women are not fully and productively employed. 

Among the most concerning facts: millennial men don’t see the gap nearly as much as millennial women do. If half the population doesn’t see it as a problem, it’ll be tough to find a solution. 

Bonus: What’s on Eric Schmidt’s mind? 

The Google boss took the stage to roll out his 6 predictions for the coming years. First, a surge in plant-based protein will dramatically cut the need for environmentally demanding livestock. Next, virtual reality. “It’s about to explode,” he said. The technology that Facebook is trying to make big with Oculus is hitting warp speed in terms of capabilities. Travel, entertainment, sports, business meetings, education — they won’t be the same. Nor will housing, if 3D printing arrives in the form of machines spewing out buildings and disrupting construction costs. Next, our phones will become critical medical devices, linking our bodies to medical experts and diagnostic machines that will allow us to avoid doctor’s offices. And if we do need to get to a hospital, we’ll have self-driving cars to get us there. 

In Schmidt’s mind, it’s the halcyon future, filled with leisure, love and longevity. 

Do the black hats know?