Michael Milken

Michael Milken studied at UC Berkeley and earned an MBA from the Wharton School at the University of Pennsylvania. He joined Drexel Burnham Lambert in 1969 and rapidly built their high-yield bond department, which he relocated to Beverly Hills in 1978. Milken's fundamental insight was that the default rates on non-investment-grade bonds were far lower than rating agencies and conventional wisdom implied, and that investors demanding very high yields for such bonds were systematically overcompensating for risk. This meant that companies rated below investment grade — including startup companies, mid-market firms, and companies undergoing restructuring — could access capital markets at rates that gave investors positive expected returns while funding growth that would otherwise be impossible. Milken's high-yield department became the financing engine of the 1980s LBO revolution: KKR, Forstmann Little, and other buyout firms used Drexel junk bonds to finance mega-deals. Milken personally advised on and financed over $100 billion in transactions. His department generated extraordinary profits for Drexel — and $550 million in personal compensation for Milken himself in 1987 alone. He pleaded guilty to securities violations in 1990 and was sentenced to 10 years in prison, later reduced to two years. He received a presidential pardon in 2020. He subsequently founded the Milken Institute, a nonprofit devoted to improving global health, education, and economic policy. The high-yield bond market Milken created now finances thousands of companies and exceeds $3 trillion in size.