In its report, released two days before the Group of 20 Summit in London, the OECD says that U.S. real gross domestic product will fall 4 percent in 2009 and then level to zero in 2010. “A gradual recovery may take hold next year as financial conditions improve and macroeconomic policies exert a growing positive impulse,” said the report.

The OECD advised that the Federal Reserve maintain its near-zero interest rates through 2010.

The report emphasized that the U.S. must be vigilant in patrolling the state of the market, and must be prepared to buy up even more bad assets in an effort to stabilize the financial sector, advising that financial regulators should “make it clear that [they] will not hesitate to restructure systematically important but fragile financial institutions, even if that entails taking control of them.”

The OECD report also addressed Canada, predicting a 2009 real GDP drop of 3 percent, with an increase of 0.3 percent next year. Economic activity in all of the OECD countries will average a drop of 4.3 percent, with Japan projected to lose 6.6 percent of its real GDP.

World Bank President Robert Zoellick told the Daily Mail newspaper that central and eastern European countries were particularly vulnerable.

“My guess is that growth will probably fall about 1 to 2 percent,” he told the paper in its Thursday edition.

“We haven’t seen numbers like that since World War Two, which really means the Thirties. So these are serious and dangerous times.”

Dominique Strauss-Kahn, head of the International Monetary Fund, warned the world yesterday that it would be gripped by a “Great Recession” and that his earlier forecast for economic stagnation this year was too optimistic.

Zoellick said G20 leaders, due to meet in London on April 2, should focus on sorting out problems in the banking system rather than additional fiscal measures to boost demand.

That view may put him at odds with the United States and Britain which have both urged G20 nations to increase spending to pull the economy out of recession.

“Stimulus plans will be like a sugar high unless you fix the banking system,” Zoellick told Reuters.

Zoellick says the World Bank was also seeking to raise money through its private-sector arm, the International Finance Corporation. “We could probably do $30 billion of IFC lending for the next three years,” he said.

The conference was hosted and organized by Brazilian president Luiz Inácio Lula da Silva, who went so far as to shuttle in foreign leaders using his own country’s air force, according to the Times. The conference addressed the credit crisis and its ramifications across Latin America, and was largely condemnatory of the United States.

A popular sentiment among attendees was that the United States should abandon its nearly 50 year-old embargo on Cuba, and work to include the country into the global dialogue. “This is a further step in the process of ensuring that Cuba occupies its rightful place of dignity in the region and throughout the world,” said Jamaican prime minister Bruce Golding.

Many countries also blamed the United States for stoking the current downturn, with Cuban president Raúl Castro labeling the U.S. “neo-liberalist” in regards to its economic attitudes. “In the middle of an unprecedented global crisis, our countries are discovering that they aren’t part of the problem,” said da Silva, implicitly blaming the United States.

The Brazil conference comes four months prior to the next Summit of the Americas, a meeting that convenes most countries in North and South America, excluding Cuba. Observers claimed that Brazil was attempting one-upsmanship in hosting its own meeting so close to the approaching Summit. “There is no question that this is about exclusion, about excluding the United States,” said Peter Hakim, president of the Inter-American Dialogue, a policy research group in Washington. “Brazil is demonstrating its enormous convening power.”

With the opportunities created by a rapidly evolving spectrum of technology and a global economic frontier that is continually opening its borders to new players, today’s executives and directors must be willing to adapt to a business and governance environment that is constantly shifting. One of the most effective ways of adapting is through the pursuit of professional development offered by executive education programs at top universities around the country.

Successful directors have all spent several thousands of hours in high-pressure, high-impact work environments in which the combined knowledge and instinct of a company’s management team must be shaped into a very specific plan of action. With this kind of real-world experience, in combination with advanced degrees already held by most directors, one might question the practical advantages of going back to the classroom.

The answer is new perspective. “Knowledge has a way of moving at a clip that eclipses very quickly that which was gained in prior formal education,” says Dr. Constantine Konstans, executive director of the Institute for Excellence in Corporate Governance at the University of Texas at Dallas. “Real-world experience is invaluable, but it tends simply to repeat the same processes and outlooks rather than expanding one’s exposure to new ideas.”

Charles Breckling, managing director of marketing at Harvard Business School Executive Education, echoes this sentiment: “The half-life of any educational experience is short. If you’re on a board and received an MBA twenty or thirty years ago, the business climate has changed to the point where you need exposure to new ideas in order to stay sharp.”

The benefits of executive education are worthwhile and far-reaching. In addition to the inherent benefits of gaining access to relevant and new information, the opportunities afforded by working with one’s peers in a “professional classroom” setting are unparalleled. “Our courses have great convening power,” says Breckling. “We bring board members from all over the world, and they in turn bring a broad global outlook you can’t find anywhere else.” In addition to the expertise of the professors, students in these programs often instruct and learn from each other, as their shared experiences provide plenty of case studies.

The range of topics covered by executive education programs entirely encompasses the modern-day business climate. Established programs at Harvard Business School Executive Education, for example, include courses in leadership, strategy, corporate governance, finance, technology management, marketing, negotiation, and personal development—not to mention custom programs designed for a specific company’s needs.

Improved Ratings

While pursuing executive education is certainly beneficial for the individual who takes the course, it also strengthens the board on which he or she sits—and not just by virtue of having the insights of this newly enhanced individual in the company. Many governance ratings agencies look kindly upon boards whose members have participated in executive education programs, and take completion of these programs into consideration when rating companies’ boards.

One such ratings agency is RiskMetrics, whose ISS Corporate Governance Services department determines the best director education programs. “The types of issues that boards are confronted with today—governance fallouts, the mortgage crisis, options backdating scandals—are so new that it’s important for directors to be able to meet with their peers to discuss and strategize,” says John Deosaran, head of product and business development, ESG Analytics, at RiskMetrics Group. “We grant accreditation to those executive education programs that allow directors to tackle the challenging problems of today.”

Because of the knowledge and new energy that a well-educated director or executive can bring back to a management team, it’s not uncommon for a company to grant time off and foot some or all of the bill for an executive going “back to school.” Since these courses can range from one-day intensive sessions to several weeks, and because enrollment fees can range from a few thousand dollars to hundreds of thousands for large groups, it certainly doesn’t hurt to have the blessing (and backing) of the corporation.

When it comes to choosing the path to continued education, options facing the knowledge-hungry officer or director are diverse and plentiful. The two main categories are open-enrollment courses and custom-built programs.

Open-enrollment courses tend to take more time than their custom counterparts, and typically are offered in a more traditional classroom setting. Institutions that offer these programs— typically universities, director groups, or other similar organizations—advertise their courses to the public, and students register independently. Open-enrollment courses tend to assume the traditional forms of a collegiate classroom, with lectures, guest speakers, open discussions, and even campus housing. The Wharton Center for Leadership and Change Management, for example, offers open-enrollment courses that feature a multi-layered classroom experience based on case studies, team exercises, peerto- peer exchange, and other methods of instruction that facilitate dialogue and shared experience between students and faculty. When class concludes, students have access to a guest room and all the amenities of college life, though likely in a slightly more upscale environment than former undergrads may remember.

Custom Fit

Custom-education courses are tailored to the requirements of the company taking the course. The “student body” of a custom program will be composed almost exclusively of executives and directors from a single company. Unlike open enrollment, custom- education programs are organized and shaped through communication between the educational institution offering the program and a representative from the company. The institution determines the needs of a company and then draws up an appropriate program, assembling a curriculum, class site, and instructors selected from a wide pool of available professors, litigators, board members, and regulators.

Because custom programs hinge so directly on the needs of the company taking them, the array of possibilities for educational expansion is literally endless. Most prominent institutions that offer custom programs have worldwide facilities and an international staff of instructors, allowing for truly global educational perspectives.

One such institution, Duke Corporate Education—a not-for-profit owned by Duke University—offers programs throughout the world. “Our business model has cut itself off geographically from the school,” says marketing director Paul Baerman, “allowing us maximum versatility in going where our clients need to be. A narrow perspective in the boardroom can be greatly enhanced by exposure to broader international territories.”

While some executive education programs take a straightforward instructional path, some push the boundaries well past the familiar. Baerman recounts a custom program in which members of a boardroom were brought to a hospital and told to don the uniform of the hospital’s employees. They were separated and individually greeted by an oncologist who gave them the weighty task of informing a patient (actually an actor) that he had cancer. In nearly all of the cases, the student was unable to break the bad news, and either circumvented the facts or retreated for “further information.” The lesson? “Even in a life-or-death situation, the director was unable to address that which needed to be addressed,” says Baerman. “After the ploy was revealed, these directors discussed and came to the conclusion that honesty and straightforwardness are the most important aspects of communication. This is a revelation that has an immediate effect in the boardroom.”

Despite the myriad programs, instructional methods, and offerings available, executive education programs all share a common purpose: better boardroom and executive performance. This goal is facilitated by a well-designed program led by engaging, knowledgeable instructors with real-world as well as theoretical understanding, but the key to improvement may in fact lie within the students themselves.

“What we teach isn’t so much an academic or professional solution to a problem, but rather a personal one,” explains Baerman. “One of our sayings is ‘the answer is often in the room, which means that we don’t so much teach you something new, but we guide you through finding it within your own capabilities and experiences.”

For program details visit:

UCLA’s Director Education & Certification Program

October 27-29, 2008

UCLA Anderson

Florida’s Directors’ Institute

Friday November 7, 2008

The University of Tampa

The Directors’ Consortium

February 25-27, 2009

Stanford,CA

Harvard Business School Executive Education

Audit Committees in a New Era Of Governance

July 2009

Compensation Committees: New Challenges, New Solutions

July 2009

Making Corporate Boards More Effective

July 2008

Return on Education

If you look at studies showing the rates of return for government investments in education, you will find that the highest rate of return comes from early childcare education and the second highest is from elementary school. Government investments in high school have a higher rate of return than college. Investing in elementary school computes to 18 percent over a 40-year period or 1,000 times your money. These are amazing rates of return and, as we know, government investments generally don’t achieve those rates.

Now, look at the private sector, or your own investment in your child’s education. It is estimated that $1 million will be invested in the education of a child born in America in 2007. With 4.6 million people expected to be born this year, we are talking about a $4.6 trillion investment over their lifetimes. Who’s going to pay? The parents, the grandparents, aunts and uncles, the state, local governments, federal governments, employers, and the individuals themselves. Looking at this as an asset, it represents an enormous investment with a very high rate of return.

As most of you know, in the United States particularly, jobs have changed dramatically and today’s labor market is totally different than it was a couple of decades ago. But in 1950, when I was young, most of the jobs were unskilled. You could work for the United Auto Workers, you could work for the United Steelworkers, or you could have many other jobs and achieve a middle-class life without any significant skills. A willingness to work hard was enough.

But that is no longer the case. Today, more than 85 percent of jobs require at least some higher level of skills. This century, in my opinion, will be defined by a worldwide competition for human capital. But when you recognize that two-thirds of the children in Los Angeles cannot read at the basic level—and by basic I mean they can not read simple three- and four-letter phrases: “Where is your mother? Is your Dad at home?”—you can see they are at a huge disadvantage. The result is that of these children, 50 percent will not graduate and probably 60 to 65 percent will never really be educated or prepared for the work force. So we have enormous challenges in our system, and we’re looking for the wake-up call in education.

Global Competition for Leaders

The Biopolis in Singapore, headed by Philip Yeo, is rushing to become the world’s leader in medical research. They’ve also recruited two of the leading scientists in the United States in stem cell research at the National Institute of Health. In fact, many of the leading scientists there are from different countries. And they are not alone. Imperial College, one of the two leading science colleges in the United Kingdom today, has enjoyed great success recruiting foreign students, for example. It has 14 Nobel Prize winners, almost as many as Berkeley. (I went to Berkeley, so there’s some bias here.) In the years from 2000 to 2006, largely because of the immigration difficulties in the United States after 9/11 and the difficulty for foreign students to come into the United States, there’s been an eight-fold increase in students from China going to the United Kingdom. Many of those students would have been here. The future has already been changed. The thousands of young scientists and young scholars who didn’t come to the United States that might have, in the last years—their lives have been changed. Any breakthroughs that they might have achieved or contributed to will happen somewhere else.

There is an example that is relevant to this point. There are two countries, both part of the British Commonwealth and both given their independence, Singapore and Jamaica. Lee Kuan Yew, who was the prime minister of Singapore, actually went and visited Jamaica and looked at Jamaica. They were very similar. They both had per- capita income in 1960 of $1,900. Both focused on tourism and agriculture. They had similar weather. But one managed to grow per-capita income at 12 percent per year for the last 47 years, while the other grew at about 1.5 percent. One chose to build a society based on human capital; and one continued with tourism and agriculture. And there’s almost nothing in common today with Jamaica and Singapore except the weather, because of decisions that were made based on human capital.

I want to step back for a moment and talk about a change in my own life. There was something called Sputnik that went up in 1957. The general reaction was that this was a great victory for the Soviet Union and for the Communist system. And those of you in school will remember our duck-and-cover drills. I went to school in the San Fernando Valley and had this fifth-grade teacher who kept trying to convince me that if a nuclear bomb hit Hesby Street School, I’d be safe under my desk. And if I wasn’t under my desk, that was it for me. We argued back and forth until we reached a compromise: I wouldn’t disrupt the class anymore and she wouldn’t try to convince me that I would be safe under my desk.

But the Soviet Union thought that the day that Sputnik launched was their great day. It was not. It was the end of the Soviet Union. This was the first step, because it woke up a sleeping giant here in the United States. It focused a whole nation on science and mathematics. We had a president say we were going to send someone to the moon. And so you’ll find today, if you go to a company like Lockheed, that almost 50 percent of their mathematicians and physicists went into those fields because of Sputnik. That was the wake-up call. And I think one of the things I want to say is: Where is Sputnik today? Where are these wake-up calls today that could mobilize an entire nation to focus on some of our big challenges?

The Laws of Economic Growth

Let’s look at some of the economies of the world today. The United States is the largest, Japan second, Germany is third. China is probably going to be moving up to fourth by the end of this year, passing the United Kingdom and France. What countries will be the largest economies in the future? You can take our projections at the Milken Institute or others, but China will become the world’s largest economy some time in the next few decades. The United States will then be second, India third, Japan fourth. Brazil, Russia, Indonesia, and Mexico will replace France, Italy, Spain, and Canada as next in line.

It might surprise some to hear that in 1820, China was the world’s largest economy. For most of the last 3,000 years, China has been the world’s largest economy. India is a similar situation: if you went to sleep in 1820 and woke up after 200 years, you’d think that nothing happened, nothing changed. But the United States, this amazing country with property rights, rule of law, freedom, democracy, and a bunch of other things, went from 1.8 percent of the world’s economy to 40 percent of the world’s economy at the peak, with only 5 percent of the people on the planet during that time. So we have to remember the lessons of what fueled that growth.

The two things that changed the world more than anything are advances in telecommunications and computing power. Some companies thought telecom was a for-profit business, not recognizing it was foreign aid, and a trillion dollars was lost in telecom overbuilding. But the beneficiaries were the rest of the world, particularly India, where the cost of a telephone call went from $10 a minute to four cents in 2007, and it is going to zero. So one of the things to focus on in change that’s going to occur, is that telecommunication costs are going to zero. You’ll be able to call anybody, any place on the planet, for zero—or at a cost so low it’s equivalent to zero. (Unless you stay in a hotel room and use the hotel’s phone.) So therefore, at the speed of light, you can send your digital output any place on the planet. A brilliant young mathematician in India doesn’t have to leave India and come to the United States anymore. They can stay right where they are—or in Kenya, or any place else on the planet.

The other thing that happened is the growth of computing and data storage power. The supercomputer that I moved onto my trading floor in 1976—the first one on any trading floor—was easily surpassed. The iPod today stores 7,500 times as much data as my supercomputer did then. The cost of data storage is now fractions of what it was 30 years ago. So you’ll be able to move anything that exists digitally to any place in the world for zero, or close to it; store any quantity of digital data for close to zero; and analyze it at trillions of calculations a second.

Access to Capital

It is amazing when I think of these events in my life and what has changed. I came home to Los Angeles in 1965 and it was on fire. It was the middle of the Civil Rights movement and the draft for Vietnam. But you didn’t have to go to Vietnam; you could see armed personnel carriers right there in Los Angeles. And why was Los Angeles burning? I had to know, so I met an African-American, a young man, who told me he wasn’t part of the American dream. And he taught me that civil rights were not just about where you could sit on a bus, or where you can go to school, or where you can go to the bathroom, or where you can eat, but part of the American dream is having access to money and capital based on your ability, not what you look like, not who your parents were, not even what school you went to. And he didn’t have that. He wasn’t part of the American dream. So I had to change my major again. I had to go back to Berkeley and switch to business.

I put a formula together that basically said prosperity was dependent on financial technology, access to capital—which has a multiplier affect on human capital, the world’s biggest asset—social capital, and real assets. Without access to financial capital, the greatest ideas might never have come to fruition. Most of you don’t remember who created air conditioning in 1835 because he died broke–no one would give him any money–but we think 70 years later that it was Carrier, because he got access to capital.

So what are all these financial technologies that today we take for granted, that didn’t exist when I was at Berkeley or Wharton? They all changed the world greatly. And this democratization of capital– there are more financial institutions listed on the New York Stock Exchange today than there are industrial companies. When I went to Wall Street, 10 or 12 people decided who got money. Today, there are tens of thousands of people making those decisions. No one can control access to capital, because there are all these points of light, and this democratization of financial assets leads to democratization of companies and creates a lot of jobs.

As you think of people who became household names, you can see how big a role the democratization of capital has played: Ted Turner; Bill McGowan from MCI, who really changed telecommunications for all of us; Craig McCaw, who changed cellular; Reg Lewis, the first African-American ever to borrow a billion dollars and buy a company [TLC Beatrice International]; Kevork Hovnanian, thrown out of the Middle East because of his religion, who came here with nothing, and built one of the largest home builders in America [Hovnanian Enterprises]; or Steve Wynn—the Walt Disney for adults. All of them had fantastic ability, but what they all needed was capital.

Part three of “A Capitalist’s Manifesto” will appear in the December/January issue of Directorship.