Alfred R. Berkeley III
President, Nasdaq
2000 Commencement Address
May 21, 2000

Alfred R. Berkeley III: I'm absolutely delighted to be here. I will tell you that the view from this end is much different from the view from that end. I was going to talk for about 15 or 20 minutes until I heard from the Darden School. I think now it'll take about two hours and 15 minutes. When I was honored to be asked to participate in your graduation, your commencement, I wondered what I could say that would be meaningful to you. It seems to me that commencements are about commencing. The word in the book is finals, but really what you're doing is you're going on to a new stage in your life, and when I was sitting there in 1966 where you're sitting, I was filled with excitement and apprehension, wondering how I was going to fit into the world. What was going to happen to me next? Little did I know that the current events of the day, Vietnam War, for example, which were momentous and important, were accompanied by something probably more significant in the long term, something that was going on those very years that I had not a clue of.

I'm going to talk to you today about the three big issues that we see affecting the NASDAQ stock market and I'm going to try to relate them to your life. We think that there's an explosion of knowledge going on. We think that the world and the technology that's been invented in that explosion of knowledge is interconnecting people in a way that's momentously important. And, finally, we think that we're seeing a proliferation based on that interconnectedness of free markets that is incredibly important to mankind.

What was it that was going on 30-some years ago when I was sitting where you're sitting? A number of things were going on in basic research. One of them, the most obvious, has been part of this cornucopia that we're enjoying now, all of this wonderful high standard of living that we're enjoying in the United States. I just got back from West Africa and from India. Believe me--we are privileged with what we enjoy in this country, things as basic as the rule of law.

One of the things that was going on 1966 that we're benefiting from now was the early technology that went into creating the Internet. I'm mentioning that to you because I want you to look 30 years ahead. I want to talk to you about what you've accomplished, but I want to lay some obligations on you. We are enjoying an extraordinary period in human history in this country now. We need the kind of basic research that was going on that created the Internet in the 1960s and some of the basic discoveries of molecular biology that have led to our genetics revolution that we're beginning to benefit from now. I want to ask you to insist by participating in your democratic government, talk to your congressmen, talk to your senators, let's fund basic research. I'm completely selfish in this mold. I'm completely selfish because basic research with a 20- or 30-year lag produces a lot of NASDAQ companies. The heart of the NASDAQ has been inventions that have come about and applied in commerce to raise our standard of living. As we look at this explosion of knowledge that started with a lot of basic research primarily during World War II and after World War II, we've got to replenish that early work so that it can continue to move our standard of living ahead.

I'd like you to think about two or three things. What universities do for the country is incredibly important. I've been working with the Council on Competitiveness looking at where clusters of innovation have occurred in the United States, where the sustainable economic growth that leads to our higher standard of living comes from. There is no a cluster of innovation in the United States that does not have at least one major research institution at its core. Well, how do we develop knowledge? We develop it through basic research.

Well, how do we pass knowledge on? We must do it through basic education. We have a crisis in this country in that we're not educating a huge percentage of our population. I would say to you that what we're doing in basic education sets the groundwork for whether the higher levels of knowledge can indeed defuse through the population and whether we'll have the work force that we need in the future. I don't want this to be a remote set of words for people taking a degree from a university today. One thing you'll find, as I have, is that as soon as you're out of the University time picks up pace. I can remember as if it were yesterday when I was here and I don't know where all those years went, so don't think that the future is some time far off long way away. The future's actually now and what you do and what you commit to becomes incredibly important as to what the country becomes because you're among the privileged leaders.

Let's talk a little bit more about basic education. You have a wonderful development here in Charlottesville in this University with the Core Knowledge Program. It is looking at what we need as a country to all know about and I think has a wonderful opportunity of bringing the country together in a way that we do not have in a large fractious country otherwise, and I applaud Dr. Hirsch for his work in that area.

There are other things that are happening. The NASDAQ stock market is benefiting from this explosion of knowledge by the creation of new companies. The interconnectedness of the world is going to put you in a global labor market. The explosion of knowledge is going to require you to reinvent yourself every three or four or five years. You are just beginning your education. The way that these wonderful inventions and knowledge and this wonderful interconnectedness comes to have a role in individual people's lives is through the explosion and free markets that we're experiencing today. I get calls from venture capitalists practically every week saying gee, I just put a lot of money in e-something--e-plastics, e-steel, e-furniture, e-whatever it is.

There's a new NASDAQ-like market springing up for essentially every segment of our economy. They ask what can they learn from the experience that America's financial markets have already developed in bringing strangers together through various communications capabilities in order to do mutually advantageous transactions together. That's what markets are all about--mutually advantageous transactions. Well, I tell them that they should have come and talked to me before they put their money up. There's a lot to know. We have about a 100 years of experience, 92 if you start with the credit crises of 1908, and the ultimate development of the Federal Reserve Board in the 1912-1914 period and the politics of the '30s and the crash of '29 and the development of the Securities Exchange Act, '33 Act, '34 Act, the Maloney Amendment in '79.

All of these things sound sort of abstract but they're all about how human beings deal with each other. We have a long tug of war between privileged market insiders who want to keep what they have close to their chest and the public operating since the '30s through the Securities and Exchange Commission saying the public deserves to see more. We have a whole book of rules in the NASDAQ. We have a governance oversighted NASDA regulation that insures that we adhere to our own rules. We have the Securities and Exchange Commission looking over NASDA regulation and we have the Congress--

By the way, we have a great public servant, Mr. Bliley. I don't know where you are, but one of your Board of Visitors is responsible as much anybody in this country for the soundness of the markets that we have today through his service in the Congress overseeing the SEC and overseeing America's markets. This is all about how we deal with each other. We don't have a rule in our markets that didn't come about because the public said in our democratic process this behavior that we see some people exhibiting is not acceptable. We have raised the bar over time and we have a whole set of rules of engagement, how we're going to deal with each other. Well, I say to my friends in the venture capital business that they need to understand those rules of engagement because the financial markets are so much farther ahead, have had so many more transactions than the other new market wanna-bes.

But all of the issues of human behavior are going to be the same. You're going to have to deliver a product that is what you say it is. You're going to have to tell people when you solicit their order the truth. You're going to have to let them know in what order of precedence they're going to be dealt when they come to market, and that they're going to be dealt with fairly. This is why America's financial markets are the envy of the world. This is why we have a large part of our economy funded with low cost capital. There's no other country in the world like ours that will let an entrepreneur come forward with an idea and has markets and a regulatory scheme that will allow those entrepreneurs to take public money and put those ideas to the test. There's nothing that we do in the markets that says those ideas must succeed, but we give them a chance where in many other countries they would not be able to succeed.

Well, if you tie all this together, I think that you have a certain number of obligations. I don't want for a minute to say that you don't have huge opportunities because you do. There's no opportunity like the opportunity you have, but I don't want you to take those opportunities on without a concomitant sense of obligation. These wonderful standards of living that we have today did not occur by accident. They occurred because people like you who are educated and who have a leadership position in our society engage in the process of government. I challenge you to get involved, to learn and participate. If you do, you will make this University proud.