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Speaker 1: This is Mesters in Business with Very Results on Bloomberg

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Speaker 1: Radio this weekend. On the podcast, I have an extra

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Speaker 1: special guest somebody I know for a long time. Perth

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Speaker 1: Toll is the founder of the Freedom et F, based

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Speaker 1: on an index that she helped to create, using metrics

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Speaker 1: designed to emphasize the economic and personal freedoms of different countries.

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Speaker 1: She'll tell us how she starts with a data set

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Speaker 1: up from various think tanks like Frasier and Cato that

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Speaker 1: rank countries based on their freedom indexes, and then proceeds

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Speaker 1: to put them through an algorithm that she helped to create.

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Speaker 1: And what you end up with is a list of

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Speaker 1: some of the most innovative free emerging market countries in

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Speaker 1: the world that also end up doing really well and

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Speaker 1: acted over the past couple of years. When you see

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Speaker 1: how poorly China has done, and obviously Russia's have seen

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Speaker 1: all its stocks go to zero. Uh, those have not

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Speaker 1: been in her funds, and so on a relative basis,

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Speaker 1: her fund has done really quite splendidly. You avoid some

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Speaker 1: of the worst countries in the world in a n

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Speaker 1: e M index, obviously you're gonna do well on an

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Speaker 1: absolute basis. They've done well. Also, just go punch in

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Speaker 1: f R d M and you can see how all

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Speaker 1: the fund has done over the past couple of years.

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Speaker 1: It's about two hundred million dollars in assets. It's just

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Speaker 1: turned three years old and just became a five star

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Speaker 1: Morning Star rank Mutual Funds. So really quite fascinating. If

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Speaker 1: you're at all interested in ETFs, emerging markets, or innovative

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Speaker 1: new ways to slicenseise the world of assets, I think

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Speaker 1: you're gonna find this to be a fascinating conversation. So,

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Speaker 1: with no further ado, my interview with Perth Toll. This

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Speaker 1: is Masters in Business with Very Results on Bluebird Radio.

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Speaker 1: I'm Barry Retults. You're listening to Masters in Business on

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Speaker 1: Bloomberg Radio. My extra special guest this week is so

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Speaker 1: what I've known for a long time. Perth Toll is

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Speaker 1: the founder of the Life and Liberty Indexes. She is

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Speaker 1: also the sponsor of the Freedom one hundred Emerging Markets

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Speaker 1: et F. It's a first of its kind strategy using

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Speaker 1: personal and economic freedom metrics as key factors in driving

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Speaker 1: the investing process. Perth has lived in Beijing and Hong Kong.

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Speaker 1: She currently lives in Texas. Uh and her experiences overseas

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Speaker 1: is what helped lead to the Freedom and Liberty Indexes.

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Speaker 1: Perth Toll, Welcome to Bloomberg. Thank you for having me, Barry.

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Speaker 1: I've been waiting to do your podcast for a very

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Speaker 1: long time and I honored to be here. I'm thrilled.

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Speaker 1: I'm thrilled to have you. So let's start with the

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Speaker 1: basic inspiration. I love the concept and it's amazing nobody

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Speaker 1: thought of this. But previous to you, what was the

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Speaker 1: inspiration shin for the Life and Liberty indexes? So the

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Speaker 1: seed for the idea was planted when I went back

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Speaker 1: and lived in Hong Kong after college. I was born

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Speaker 1: in Beijing, and I grew up in both China and

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Speaker 1: the US, um going back and forth between the two countries.

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Speaker 1: After college, I went and lived in Hong Kong for

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Speaker 1: about a year, reconnecting with my dad's side of the family.

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Speaker 1: And while I was there, I traveled to the mainland

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Speaker 1: to Beijing, Shanghai, shen Jin, um and I saw things

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Speaker 1: that um as a person who grew up in a

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Speaker 1: free society, mostly in my formative years, that shocked me

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Speaker 1: and I realized that my life would have been very

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Speaker 1: different had I stayed in China for my entire childhood

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Speaker 1: and as opposed to having come to the United States. UM.

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Speaker 1: So it made a difference in my life, and I

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Speaker 1: realized that it was freedom that made that difference. So

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Speaker 1: let's let's talk a little bit about both UM personal

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Speaker 1: and economic freedom. How do you use these metrics as

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Speaker 1: creating an index which the e t F is based on.

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Speaker 1: So the metrics that we use come from third party

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Speaker 1: think tanks, the Cato Institute and the Fraser Institute. And

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Speaker 1: this keeps all the all the metrics completely quantitative and independent.

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Speaker 1: So we think it's very important to have metrics that

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Speaker 1: are robust, that are independent, and that are quantitative. And

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Speaker 1: so the Cato and Fraser data set that has the

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Speaker 1: human Freedom metrics encompasses both personal and economic freedoms and

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Speaker 1: they rank a hundred and sixty five countries in the

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Speaker 1: world on these seventy nine different metrics. UM. We take

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Speaker 1: the twenty seven country Emerging Markets UM universe and just

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Speaker 1: look at those countries and those scores for those countries

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Speaker 1: based on the seventy nine metrics. Is the primary factor

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Speaker 1: that goes into our country waiting. All right, So you

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Speaker 1: have twenty seven E m countries. Uh, you're looking at

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Speaker 1: the freest ones in terms of economic freedom and personal liberty.

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Speaker 1: And then from that list, how do you go about

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Speaker 1: selecting the comp nice from within each country. Yeah, so

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Speaker 1: let me just run down the whole process just quickly

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Speaker 1: for you here. So, so, first we had those twenty

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Speaker 1: seven countries, and currently we're using the same country set

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Speaker 1: as m c I because most of our clients to

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Speaker 1: benchmark to M s I. Now we're not bound by

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Speaker 1: that though, so in the future we may add or

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Speaker 1: subtract certain countries from that universe right now is the

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Speaker 1: same as M s I. Uh. First, after we have

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Speaker 1: that universe, we look at which countries are actually big

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Speaker 1: enough and tradeable enough to be in an e t

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Speaker 1: F because this was always designed to be an ETF.

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Speaker 1: So you need liquidity and volume and the ability to

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Speaker 1: get money in and out of the country. Yes, so,

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Speaker 1: but mostly we're looking at the market cap of the

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Speaker 1: country here as a as a ratio to world market cap.

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Speaker 1: If you don't meet our minimum ratio, then you're out,

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Speaker 1: even if you're very free. So this actually eliminates very

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Speaker 1: free markets like Czech Republic, which is too small, um Peru,

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Speaker 1: which is not liquid enough, and it also eliminates some

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Speaker 1: very unfree markets like Egypt because of size. So we

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Speaker 1: have those eliminations based on market cap ratios UH. And

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Speaker 1: just to clarify, when you say size, you mean size

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Speaker 1: of the country, you mean size of the companies. The

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Speaker 1: market cap real the market cap, so you don't want

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Speaker 1: micro caps. So we want to keep it very liquid

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Speaker 1: and very tradable. So once we have those countries eliminated,

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Speaker 1: then we have about eighteen countries left in the eligible universe,

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Speaker 1: and these are the countries on which we apply the

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Speaker 1: freedom weights. It's a hundred percent freedom weighted. It's not

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Speaker 1: a it's not a tilt, and it's not in an overlay.

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Speaker 1: And the reason why we do that is because with

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Speaker 1: market capitalization waiting, which is the standard for most indexes,

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Speaker 1: including Emerging Markets UM, you end up with a lot

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Speaker 1: of autocracies with this universe. So the emerging markets universe

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Speaker 1: is filled with autocracies and countries just coming out of autocracy,

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Speaker 1: such as give us some examples like China, Russia, Saudi Arabia, Turkey, Egypt,

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Speaker 1: and so forth. So by freedom waiting instead of market

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Speaker 1: cap waiting, we're seeking to solve that problem of these

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Speaker 1: autocracy heavy concentrations in the emerging market space. And so

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Speaker 1: we created this for people who want to have that

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Speaker 1: exposure to emerging markets, people who always have either strategic

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Speaker 1: allocation or just always want that emerging markets exposure. UM,

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Speaker 1: but without funding autocracies. So there's no we've never had

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Speaker 1: any China, Russia, Saudi Arabia, Turkey and so forth because

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Speaker 1: of freedom waiting, not because we you know, arbitrarily excluded

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Speaker 1: in any country, but it's just a natural result of

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Speaker 1: that freedom waiting. So you have the set of twenty

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Speaker 1: seven countries in MSCI that gets reduced to eighteen by size,

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Speaker 1: and there's got to be thousands of potential companies win

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Speaker 1: those eighteen countries. But do you select and how do

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Speaker 1: you get there? So the most important part once we

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Speaker 1: have those eighteen, we do freedom weight those eighteen countries.

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Speaker 1: As part of that process, the worst offenders are excluded,

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Speaker 1: so the lowest scores are excluded out of this in

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Speaker 1: this process and the best of those eighteen and typically

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Speaker 1: it's between ten and eleven country are included in the index.

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Speaker 1: And that is a completely objective process. UM. That's rule space.

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Speaker 1: And I you know, my subject of opinion doesn't factor

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Speaker 1: into that at all. So now you're down to ten

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Speaker 1: or eleven countries, how do you take? How many companies

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Speaker 1: do you take from each of those countries? Yeah, so

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Speaker 1: we take the top ten largest most liquid companies in

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Speaker 1: each country that is not a state owned enterprise. And

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Speaker 1: that's the only thing that we do on the security level.

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Speaker 1: So we're just taking the largest most liquid companies that

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Speaker 1: are non state owned UM. And the reason why we

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Speaker 1: didn't add any additional factors so that obviously I work

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Speaker 1: with a lot of UM factor people UM, and the

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Speaker 1: reason why we didn't add factors to that is because

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Speaker 1: we wanted to isolate the freedom factor for this product.

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Speaker 1: It's our first e t F. It's the first Emerging

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Speaker 1: Markets e t F in the world that uses freedom waiting,

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Speaker 1: and so we wanted to see if there was a

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Speaker 1: market for this type of product and see how I

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Speaker 1: would go UM and we're very happy with the results. Yes,

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Speaker 1: so you end up with companies more or less, and

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Speaker 1: that's that's what's in the t F. Yes. So currently

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Speaker 1: there's eleven countries and there's a hundred and ten securities

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Speaker 1: in the e t F. In the previous two years,

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Speaker 1: there's been a hundred securities and ten countries, and that's

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Speaker 1: why it was called the Freedom one hundred. And the

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Speaker 1: index has been outperforming pretty dramatically over the past a

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Speaker 1: couple of years, in part because China seemed to have

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Speaker 1: imployed itself going after their own their own senior tech

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Speaker 1: people will talk about that later. And obviously Russia was

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Speaker 1: just a debacle. You sidestepped all of those because none

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Speaker 1: of those countries are in the index. Yes, and again

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Speaker 1: we don't arbitrarily exclude China or Russia. We didn't have

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Speaker 1: them in there any of this time because of the

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Speaker 1: it's a natural result of that freedom waiting. So freedom

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Speaker 1: waiting in this case worked very well and it was

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Speaker 1: a very effective leading indicator of some of these tail

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Speaker 1: risks that investors in these cap weighted index has experienced.

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Speaker 1: And if I recall, the E t F symbol is

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Speaker 1: f R d M for freedom. Is that right? Yes?

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Speaker 1: Very interesting. So let's let's talk a little bit about

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Speaker 1: the world of ETFs. First, Y and E t F

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Speaker 1: instead of a mutual fund. What was behind the thinking

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Speaker 1: of going that way, especially given your background. You were

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Speaker 1: a fidelity for a long time, and they have been

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Speaker 1: giant in mutual funds for forever. Yeah. So so once

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Speaker 1: I came back from Hong Kong, I worked at Fidelity

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Speaker 1: Investments in the l A and Houston markets. UM, and

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Speaker 1: I was at Fidelity for about ten years as a

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Speaker 1: financial advisor, And you know, that's when I started noticing

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Speaker 1: the trend of the rise of indexing and the rise

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Speaker 1: of E t s and how beneficial the E t

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Speaker 1: F structure was for clients. I don't know of any

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Speaker 1: other investment vehicle or structure that is as beneficial tax

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Speaker 1: wise for clients, and so um and trade ability and everything.

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Speaker 1: So so I was always a fan of the E

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Speaker 1: t F structure. And when I created this, I always

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Speaker 1: intended for it to be an E t F. We

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Speaker 1: created the index before there was an E t F,

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Speaker 1: but I always intended, you know, it was always designed

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Speaker 1: to be an E t F R. The old joke

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Speaker 1: was of mutual funds were invented today, they wouldn't be

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Speaker 1: able to get approved because they're so inefficient. They trade

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Speaker 1: at the end of the day and you end up

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Speaker 1: paying taxes on other people who sold, as opposed to

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Speaker 1: you paying taxes when you sell the holdings. I mean

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Speaker 1: the trading at the end of the day is not

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Speaker 1: as big of a problem because most of our investors

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Speaker 1: are long term. But UM, that tax efficiency is just

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Speaker 1: so hard to beat in any other type of vehicle.

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Speaker 1: So who are your investors? Do you have any idea

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Speaker 1: who owns cts? So right now, UM, we have about

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Speaker 1: two million under assets and so it's just beginning to

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Speaker 1: be big enough to get noticed by institutions. We're getting

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Speaker 1: more institutional request at this time. We just had UM

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Speaker 1: a family office demand that we get approved on Morgan

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Speaker 1: Stanley and they just approved us. UM. So we've been

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Speaker 1: approved on a lot more platforms lately because of the

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Speaker 1: size UM and also the three year track record and

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Speaker 1: the five star morning Star rating. Now, also that's one

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Speaker 1: of my questions for later. But since you brought it up,

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Speaker 1: you just got a five star rating on I mean,

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Speaker 1: this was last month. I shouldn't let you bring that up. Yeah,

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Speaker 1: well it's I was. It's coming up later, but since

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Speaker 1: you mentioned it, we might as well talking about now. Yeah, no,

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Speaker 1: and you know what Morning Star ratings come and go,

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Speaker 1: and I, UM, that was a surprise to me because

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Speaker 1: well I guess it wasn't a surprise because it right,

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Speaker 1: So it just happens at three years thirty six full months,

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Speaker 1: and it's based on performance, So I guess it wasn't

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Speaker 1: that much of a surprise. But um, you know what

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Speaker 1: I really appreciate about that is that I didn't expect this,

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Speaker 1: this uh strategy to play out, um the thesis to

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Speaker 1: play out this well, this quickly, and for it to

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Speaker 1: have done that in this exact three year period of

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Speaker 1: time when the morning Stars come out, Um, just all

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Speaker 1: the stars had to align for that to happen. We yeah,

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Speaker 1: and we all know how hard it is to get

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Speaker 1: five star morning Star rating, and so for us to

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Speaker 1: have that right out of the gate, I'm very grateful

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Speaker 1: for that. And I don't take much credit because a

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Speaker 1: lot of that is stuff out of my control. You know,

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Speaker 1: we can't control the market, so um, geopolitics or who's

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Speaker 1: going to invade what country? All these things. Sometimes you know,

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Speaker 1: it doesn't hurt to be smart, but being lucky goes

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Speaker 1: a long way. Yeah, I mean, I think we were

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Speaker 1: set up well just because freedom waiting. Obviously, it's the

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Speaker 1: reason why we didn't have any China or any Russia,

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Speaker 1: and that that helped us tremendously in our investors to

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Speaker 1: avoid that risk. So so here's the question, and pardon

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Speaker 1: my naivete, but the fund has been doing really well.

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Speaker 1: Geopolitical events have worked out perfectly um for for the

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Speaker 1: Freedom ETF. But go back in any decade in history

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Speaker 1: and there are very similar bad actions by bad actors, autocrats, dictates,

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Speaker 1: all sorts of um other folks. The question, and I

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Speaker 1: don't know if there's an answer to this. The question

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Speaker 1: I want to ask is how come nobody ever thought

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Speaker 1: of this? I mean, it's one of those ideas that

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Speaker 1: in hindsight is like, oh, of course you pull out

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Speaker 1: the worst players in the geopolitical world. Of course your

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Speaker 1: performance is going to be better. Has anyone ever explored

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Speaker 1: this idea before? You know what I would think? So, um, actually,

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Speaker 1: you know my friend Rob are not who isn't one

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Speaker 1: of our investors, And I first I think I introduce you,

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Speaker 1: you know what, you always say that, but on your podcast,

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Speaker 1: I'm going to say I met him on the seaplane.

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Speaker 1: That's right, flying into, flying into that's exactly right. So

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Speaker 1: when I left Idelity, and I started doing this very slowly,

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Speaker 1: I called research affiliates and I was like, hey, you know,

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Speaker 1: you guys do non cap weighted indexing. We we want

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Speaker 1: to do non cap weighted as indexing. Do you want

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Speaker 1: to work together? And they were like, no, please go.

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Speaker 1: I couldn't. I couldn't get past the first gatekeeper UM.

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Speaker 1: And then when I went to to Camp Ko talk

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Speaker 1: is because I was on a panel with David Kotok,

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Speaker 1: Black Rock and Morning Star for a cf A Society's

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Speaker 1: UM forecast panel that first year. I had no idea

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Speaker 1: what I was doing at the time. And afterwards, you know,

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Speaker 1: David invited me to this camp and I was like,

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Speaker 1: what is this. It's like fifty economists that go fishing

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Speaker 1: in the woods next to Canada for three days with

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Speaker 1: no WiFi. And actually my friend said you should go

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Speaker 1: because Barry rid Holes goes to that camp. Yeah, it

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Speaker 1: was Christian Magoon and Amplify who said Barry rid Holes

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Speaker 1: goes to that camp. You should go and you can

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Speaker 1: meet Barry. And so you are partly responsible for me

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Speaker 1: going that year in more than one reason. And you're

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Speaker 1: also responsible for Rob going that year because he lost

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Speaker 1: the bet and he had to he went to pay

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Speaker 1: that bet. He doesn't go every year, you know, you know,

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Speaker 1: he hasn't been back since and before that he was

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Speaker 1: there maybe five to seven years prior, took advantage of me.

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Speaker 1: I was very very drunk when he when he said

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Speaker 1: let's make a bet, and I'm like, it was an

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Speaker 1: out of body experience. I watched my right hand should

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Speaker 1: go up and shake his hands and the back of

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Speaker 1: my brain was, what the hell are you doing, you idiot.

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Speaker 1: That's a lot of money and he decides to show

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Speaker 1: it with a brick of cash. It was wasn't even

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Speaker 1: a check. It's like whack. It's pretty pretty hilarious. So yeah,

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Speaker 1: so that's a funny coincidence. So I vaguely remember introducing

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Speaker 1: you to Rob out on that deck, not realizing you

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Speaker 1: guys flew in together. Yes, we flew in on the

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Speaker 1: on the seaplane because I call the seaplane company the

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Speaker 1: day I was coming in and I was like, I'm

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Speaker 1: coming in from LaGuardia today. Is it too late to

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Speaker 1: get a seaplane? And they said, no, you can share

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Speaker 1: with Rob or not. Here's his flight number. Just go

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Speaker 1: intercept him at the airport and I did, and I

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Speaker 1: was like like that. Yeah. I was like, hey, did

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Speaker 1: they tell you were gonna be writing together? And and

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Speaker 1: that's how we met. He heard the idea. UM, you

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Speaker 1: pitched him on the plane. Then it's loud and buzzy

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Speaker 1: and you're literally you have those heads five feet over

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Speaker 1: the swamp, your moose and stuff running. I believe he

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Speaker 1: asked what I do? So okay? So it was an

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Speaker 1: lf field, So he was. He was one of your

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Speaker 1: earliest investors, the first one he invested after camping into

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Speaker 1: the into the company, not as an investor investor that too.

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Speaker 1: So after camp he committed to being the first investor

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Speaker 1: in the at the time non existent fund. And then

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Speaker 1: a while later is when I found out I would

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Speaker 1: have to launch the fund myself instead of just you know,

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Speaker 1: licensing the index. And that's when he became a g

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Speaker 1: P LP investor. So who else when you say you

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Speaker 1: have to launch the fund yourself, aren't you running this

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Speaker 1: with another group that helps manage. Yes. So my initial

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Speaker 1: plan after I had the index, and this is when

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Speaker 1: I met him and you at camp KO talk and

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Speaker 1: there wasn't a fund yet, UM was to license the index.

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Speaker 1: Who like I shares or vamp or someone UM. I

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Speaker 1: talked to I shares, They didn't want it. I talked

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Speaker 1: to everyone and no one wanted it. So eventually I

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Speaker 1: just had to launch it on my own um and

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Speaker 1: that's when I said, okay, I'll need to raise funds

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Speaker 1: because the operating costs for an e t f R

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Speaker 1: and no, it's not in substant ential, it's it's between

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Speaker 1: legal and compliance and regulatory filings, and you know, it's

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Speaker 1: a quarter million to a half a million dollars. Well,

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Speaker 1: in addition to that, in emerging markets, we actually give

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Speaker 1: you access to local shares on local exchanges. So we

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Speaker 1: paid the custody costs of giving you that access to

341
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Speaker 1: give you that market um exposure, and that's one of

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Speaker 1: the things I'm very proud of and very proud to

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Speaker 1: pay on behalf of my clients. So um so that

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Speaker 1: that's even more expensive for emerging markets. So we had

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Speaker 1: to raise funds for that, and I ended up, you know,

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Speaker 1: as you know, working with et F Architect prior they

347
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Speaker 1: were called alf Architect at the time, and their first

348
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Speaker 1: white label clients, West Gray and the whole crew over there,

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Speaker 1: that that they're actually a really good group of guys

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Speaker 1: and smartest can be. You did introduce me to West Gray,

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Speaker 1: as I recall, h So, alright, listen, I'm not looking

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Speaker 1: for a commission on any of this. It was just

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Speaker 1: I find West of stuff to be fascinating. He's an

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Speaker 1: interesting guy, a marine captain slash quant just such an

355
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Speaker 1: unusual background, you know, and and then do really good work.

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Speaker 1: I didn't realize they changed their name from Alpha Architect

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Speaker 1: to EAT. No, they didn't change their name. They have

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Speaker 1: they separated the entities. Oh, so you have E. T.

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Speaker 1: F Architect as one group. That makes sense in an

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Speaker 1: Alpha Architect as a as another group. Will say say

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Speaker 1: hello to West for me. UM, I really like him

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Speaker 1: and his crew. So we went over twenty seven countries

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Speaker 1: down to eighteen, down to ten or eleven UM and

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Speaker 1: ten most liquid companies within each UH within each country.

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Speaker 1: How about rebalancing? How do you go about over the

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Speaker 1: course of the year keeping things in in line with

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Speaker 1: the original balancing? And then how often do you make

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Speaker 1: changes in the index? Yeah, so we rebalanced once a year,

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Speaker 1: because the human rights data comes out once a year,

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Speaker 1: so the Personal and Economic Freedom data UM, and it

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Speaker 1: comes out around the end of the year. So we

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Speaker 1: rebalanced the third Friday in January UM and then we

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Speaker 1: leave it until the next year. If something happens in between,

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Speaker 1: we don't respond to it. Immediately and we have to

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Speaker 1: wait till rebalance um. There is a rule that, uh

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Speaker 1: if if if country falls more than five points on

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Speaker 1: one of our skills, that we do kick it out,

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Speaker 1: even if it's already in the index. But we do

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Speaker 1: that a rebalance time. So there's a basically it's a

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Speaker 1: freedom decline momentum role. And the reason why we do

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Speaker 1: that is we found that freedom. When it increases, it

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Speaker 1: does so gradually, and when it decreases, it does so

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Speaker 1: very quickly, and so we don't want to be catching

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Speaker 1: that falling knife, so to speak. The only country that's

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Speaker 1: ever triggered that it was Turkey, and that's before the

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Speaker 1: e t F existed. It was when it was just

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Speaker 1: the index, and that was in two thousand eighteen rebalance

388
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Speaker 1: um and it was because they found more than five

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Speaker 1: points on the previous year's scales and they've never made

390
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Speaker 1: it back into the index. Sense. So hypothetically, if pre

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Speaker 1: ordawan Turkey is in your holding and then someone comes

392
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Speaker 1: in who's an autocrat who removes a democratic um election

393
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Speaker 1: rules and and imprisons his political opponents, they could end

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Speaker 1: up staying in the index for the balance of the year.

395
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Speaker 1: Or if it plummets that five percent, you kick him

396
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Speaker 1: right out. They would end up staying in there until

397
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Speaker 1: the rebalanced time next year. And the reason part of

398
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Speaker 1: that is, yeah, there is a lag in there. But

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Speaker 1: we found that these types of political changes do take

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Speaker 1: time to show up in markets, so it doesn't happen immediately.

401
00:21:34,600 --> 00:21:39,840
Speaker 1: If you've noticed, elections are very often mispriced for this reason. UM,

402
00:21:39,880 --> 00:21:41,560
Speaker 1: it takes a couple of years for these things to

403
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Speaker 1: show up. We I do the freedom meetings with our

404
00:21:44,359 --> 00:21:48,080
Speaker 1: econometricians at the think tanks every year, and one year

405
00:21:48,280 --> 00:21:51,960
Speaker 1: UM I was there with the Polish UH delegate from

406
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Speaker 1: the Polish think tank that works with our freedom guys

407
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Speaker 1: and UM and this was right before the p I

408
00:21:57,960 --> 00:22:00,800
Speaker 1: S government gone too power, if you'll recall um and

409
00:22:00,840 --> 00:22:03,639
Speaker 1: they said, okay, we're about to be like this ultra

410
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Speaker 1: right wing kind of crazy government and they're going to

411
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Speaker 1: have constitutional majority probably, but it won't show up in

412
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Speaker 1: the markets for a couple of years. And it happened

413
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Speaker 1: just as he said. Poland was still the best performing

414
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Speaker 1: market in two thousand seventeen. In two thousand eighteen, they

415
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Speaker 1: fell to number four from number one in our index

416
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Speaker 1: UM and they've stayed basically in the middle sense. UM.

417
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Speaker 1: But now you know, they're taking a lot of steps

418
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Speaker 1: to support Ukraine in their in their stand for freedom.

419
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Speaker 1: So I'm glad they're in there. I'm glad they're one

420
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Speaker 1: of the top four UM. But they did show that decline,

421
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Speaker 1: but not until a few years after that government came

422
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Speaker 1: into power. Because what happens is our data providers they

423
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Speaker 1: look at what's actually happening on the ground. They don't

424
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Speaker 1: just look at, okay, what we expect to happen. They're

425
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Speaker 1: not trying to predict the future. UM. We're not trying

426
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Speaker 1: to predict what countries are going to have the best

427
00:22:51,520 --> 00:22:54,800
Speaker 1: freedom momentum upwards. UM. We catch it on the downwards,

428
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Speaker 1: but not upwards, because we can't predict the future. If

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Speaker 1: we were to do that, we would have invested in Argentina,

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00:22:59,720 --> 00:23:02,919
Speaker 1: if you years ago, UM, or some of the worst countries,

431
00:23:02,920 --> 00:23:06,239
Speaker 1: because they have the best kind of UM trajectory like

432
00:23:06,359 --> 00:23:10,480
Speaker 1: expected improvement possibilities. UM. So we don't do that. We

433
00:23:10,520 --> 00:23:13,080
Speaker 1: take the absolute freedom level at the time of measurement

434
00:23:13,640 --> 00:23:16,119
Speaker 1: UM relative to their peers, and there's no you know,

435
00:23:16,160 --> 00:23:18,440
Speaker 1: there's no a hundred percent free market and there's no

436
00:23:18,880 --> 00:23:21,840
Speaker 1: percent on free market. Um, it's all a gray zone,

437
00:23:22,119 --> 00:23:25,359
Speaker 1: and so it's just relative to your peers. You know.

438
00:23:25,440 --> 00:23:28,200
Speaker 1: When we just take the freest countries, all of these

439
00:23:28,280 --> 00:23:31,399
Speaker 1: countries have problems, even the developed markets, even the United States.

440
00:23:31,600 --> 00:23:36,600
Speaker 1: We're not free here obviously. So all countries have their issues, um,

441
00:23:36,760 --> 00:23:38,359
Speaker 1: and we just try to pick the ones that have

442
00:23:38,480 --> 00:23:42,440
Speaker 1: the strongest institutions, best role of law, best individual and

443
00:23:42,480 --> 00:23:47,000
Speaker 1: investor protections, private property rights, intellectual property rights, things like that,

444
00:23:47,040 --> 00:23:50,360
Speaker 1: and just make sure we're giving our our investors the

445
00:23:50,800 --> 00:23:54,120
Speaker 1: you know, exposures that are the freest of that universe.

446
00:23:54,280 --> 00:23:56,719
Speaker 1: Let's talk a little bit about what's been going on

447
00:23:56,920 --> 00:24:01,880
Speaker 1: in China and in Russia. Starting with China began cracking

448
00:24:01,920 --> 00:24:05,639
Speaker 1: down on some of its tech leaders and technology companies

449
00:24:05,960 --> 00:24:10,119
Speaker 1: a couple of years ago, and it was really surprising

450
00:24:10,200 --> 00:24:15,919
Speaker 1: to see your government really start bashing their own economic leaders.

451
00:24:15,920 --> 00:24:18,760
Speaker 1: When you're looking at that from a distance, you have

452
00:24:18,880 --> 00:24:21,280
Speaker 1: to be thinking, well, I'm glad I don't have these

453
00:24:21,320 --> 00:24:24,280
Speaker 1: guys in my index. You know what. It's it's a

454
00:24:24,280 --> 00:24:27,720
Speaker 1: bittersweet thing, because yeah, it's it's a it's good that

455
00:24:27,760 --> 00:24:29,400
Speaker 1: we didn't have them in there, but it's terrible thing.

456
00:24:29,400 --> 00:24:32,320
Speaker 1: What's happening because you know, being from China, I want

457
00:24:32,400 --> 00:24:34,440
Speaker 1: China to to succeed. I want them to be free

458
00:24:34,920 --> 00:24:38,200
Speaker 1: UM eventually. And I you know a lot of people

459
00:24:38,359 --> 00:24:40,879
Speaker 1: like myself years ago thought that we were on that

460
00:24:40,920 --> 00:24:44,720
Speaker 1: trajectory because China increased in their freedom levels a lot

461
00:24:45,280 --> 00:24:47,639
Speaker 1: UM in the last couple of decades. You know, they

462
00:24:47,640 --> 00:24:51,600
Speaker 1: went from abysmal policies under Mao too not so bad policies.

463
00:24:51,600 --> 00:24:54,840
Speaker 1: They opened up economically and UM you know, had great

464
00:24:54,840 --> 00:24:57,720
Speaker 1: success there and their GDP grew tremendously and that was

465
00:24:57,920 --> 00:25:01,080
Speaker 1: very real growth people lifting themselves, was up out of

466
00:25:01,080 --> 00:25:06,080
Speaker 1: poverty UM and very powerful UM growth story. But now

467
00:25:06,119 --> 00:25:09,600
Speaker 1: grows story of the past because they are that growth

468
00:25:09,640 --> 00:25:11,119
Speaker 1: story of the past. You don't think there's a lot

469
00:25:11,160 --> 00:25:13,720
Speaker 1: of growth exactly what you just mentioned. So you know,

470
00:25:13,840 --> 00:25:17,280
Speaker 1: they're the star sectors like tech or we're being are

471
00:25:17,320 --> 00:25:21,600
Speaker 1: now being cracked down on UM jimping has consolidated power

472
00:25:21,800 --> 00:25:27,280
Speaker 1: is continuing to UM DIC. Yeah there's em peripheral life

473
00:25:27,320 --> 00:25:29,719
Speaker 1: and uh and yeah, there's no room for any discent.

474
00:25:30,040 --> 00:25:32,439
Speaker 1: You saw what happened in Hong Kong. Just the just

475
00:25:32,520 --> 00:25:36,440
Speaker 1: the idea of any discent UM. What about Jack ma

476
00:25:36,640 --> 00:25:38,600
Speaker 1: and you look at all the companies he's affiliated with.

477
00:25:38,760 --> 00:25:42,040
Speaker 1: So it all started with and Financial when that was scrapped.

478
00:25:42,160 --> 00:25:45,840
Speaker 1: And then Jack Ma disappeared after he said something that

479
00:25:46,400 --> 00:25:50,320
Speaker 1: wasn't kosher and criticized you know, just you know it

480
00:25:50,400 --> 00:25:53,879
Speaker 1: was actually very I think, but nine what he said. Um,

481
00:25:53,920 --> 00:25:56,320
Speaker 1: but he he criticized the government basically the way they

482
00:25:56,359 --> 00:25:59,879
Speaker 1: handled the financial sector. And you know here in the

483
00:26:00,040 --> 00:26:01,719
Speaker 1: Knitted States we do that every day. Look at us

484
00:26:01,720 --> 00:26:05,480
Speaker 1: on Twitter, I mean yeah. And so so the fact

485
00:26:05,560 --> 00:26:09,280
Speaker 1: that that even that was enough to you know, basically

486
00:26:09,320 --> 00:26:13,760
Speaker 1: disappear him. Him being a very visible persona in the

487
00:26:15,520 --> 00:26:19,720
Speaker 1: exactly and you know, just just a very character charismatic

488
00:26:20,119 --> 00:26:24,040
Speaker 1: and well loved, well looked up to guy. And uh,

489
00:26:24,119 --> 00:26:25,720
Speaker 1: you know when he disappeared, I think a lot of

490
00:26:25,720 --> 00:26:29,560
Speaker 1: people realize, Wow, if if they could disappear your founder, um,

491
00:26:29,600 --> 00:26:31,760
Speaker 1: you know, you might have some risks there that we

492
00:26:31,760 --> 00:26:35,399
Speaker 1: didn't account for. Um. And then following that, all the

493
00:26:35,440 --> 00:26:39,080
Speaker 1: other tech leaders started, the CEO started stepping down or

494
00:26:39,920 --> 00:26:44,320
Speaker 1: um pledging a ton of money for Common Prosperity, which

495
00:26:44,359 --> 00:26:47,239
Speaker 1: is one of their you know, new initiatives, and uh

496
00:26:47,359 --> 00:26:50,439
Speaker 1: that you know that money came from shareholder pockets and

497
00:26:50,520 --> 00:26:53,920
Speaker 1: it's basically a bribe. It's not going to common prosperity. UM,

498
00:26:54,000 --> 00:26:56,560
Speaker 1: it's just to keep the government happy. And so every

499
00:26:56,680 --> 00:27:00,800
Speaker 1: company in China now is required to have ammunist cell

500
00:27:01,000 --> 00:27:04,040
Speaker 1: member and you know as part of their their company, UM,

501
00:27:04,160 --> 00:27:09,480
Speaker 1: all the funds are now required to have UM communist leader. Uh.

502
00:27:09,640 --> 00:27:13,720
Speaker 1: Kind of it's like the old mob bosses with y hey,

503
00:27:13,760 --> 00:27:16,080
Speaker 1: Freddy's gonna show up and he's gonna make sure everything's

504
00:27:16,080 --> 00:27:18,600
Speaker 1: done right. It does have that feel to it. So

505
00:27:18,920 --> 00:27:21,560
Speaker 1: so this is very scary actually for someone who I mean,

506
00:27:21,600 --> 00:27:23,680
Speaker 1: I roote for China. I want them to succeed. I

507
00:27:23,960 --> 00:27:26,080
Speaker 1: know I thought they were going to be much more

508
00:27:26,080 --> 00:27:29,720
Speaker 1: successful at this point. But that's you know, the one

509
00:27:29,760 --> 00:27:33,199
Speaker 1: problem is they're reversing these policies and going back to

510
00:27:34,040 --> 00:27:38,440
Speaker 1: very uh unfree even economically policies. Um. The the other

511
00:27:38,480 --> 00:27:42,520
Speaker 1: problem is the demographics. So the one child policy for

512
00:27:42,560 --> 00:27:44,800
Speaker 1: a long time. Right by the way, there's there is

513
00:27:44,840 --> 00:27:49,720
Speaker 1: a lot of UM literature and analysis and even books

514
00:27:49,760 --> 00:27:54,520
Speaker 1: written about how China effectuated the one child policy. Yeah,

515
00:27:54,600 --> 00:27:57,399
Speaker 1: so the one child policy led to thirty million missing

516
00:27:57,440 --> 00:28:02,200
Speaker 1: women in China. That's that's official Chinese think tank estimates,

517
00:28:02,400 --> 00:28:06,440
Speaker 1: some others have it as more than twice that um.

518
00:28:06,480 --> 00:28:08,239
Speaker 1: And this is a hard issue for me because when

519
00:28:08,280 --> 00:28:10,800
Speaker 1: I went to China um And as I mentioned, I

520
00:28:10,840 --> 00:28:13,840
Speaker 1: traveled to Shanghai to Beijing. UM. I was twenty three

521
00:28:13,880 --> 00:28:16,840
Speaker 1: at the time, and I yeah, I had a friend

522
00:28:16,880 --> 00:28:19,440
Speaker 1: in Shanghai. Her name was Maggie. She was exact same

523
00:28:19,480 --> 00:28:21,600
Speaker 1: age as me, just like all of my American friends

524
00:28:21,600 --> 00:28:24,240
Speaker 1: in every way, um, except she didn't exist on paper.

525
00:28:24,320 --> 00:28:27,960
Speaker 1: She was one of what's called black children who um

526
00:28:28,040 --> 00:28:31,720
Speaker 1: I went to school under a fake surname, was a

527
00:28:31,760 --> 00:28:35,080
Speaker 1: second child, and her parents chose to to register her

528
00:28:35,119 --> 00:28:39,000
Speaker 1: brother for existence. Basically so um so no school records,

529
00:28:39,120 --> 00:28:44,040
Speaker 1: no hospital records, no um no state benefits. So it

530
00:28:44,120 --> 00:28:46,920
Speaker 1: was basically you know everything else. And and that's when

531
00:28:46,960 --> 00:28:49,600
Speaker 1: I realized, Wow, that could have been me. She was

532
00:28:49,640 --> 00:28:52,280
Speaker 1: the exact same as me in every other way and

533
00:28:52,320 --> 00:28:56,040
Speaker 1: so um so that that affected me in a profound way.

534
00:28:56,080 --> 00:28:59,120
Speaker 1: And also this policy affected our generation in a profound way.

535
00:28:59,240 --> 00:29:02,080
Speaker 1: Not only are there pretaty million missing women, there's thirty

536
00:29:02,080 --> 00:29:07,400
Speaker 1: million men who had no prospect of getting married or

537
00:29:07,400 --> 00:29:09,360
Speaker 1: finding a wife. And what do you do when you

538
00:29:09,400 --> 00:29:13,719
Speaker 1: have no prospect of ever, you know, having a family

539
00:29:14,640 --> 00:29:17,680
Speaker 1: join the military, and so that led to a huge

540
00:29:17,720 --> 00:29:20,760
Speaker 1: military build up in China as well. And so, um,

541
00:29:20,800 --> 00:29:23,080
Speaker 1: this is a policy that made me realize, Okay, so

542
00:29:23,160 --> 00:29:26,760
Speaker 1: policies matter, governance matters, um, and these types of things

543
00:29:26,800 --> 00:29:30,360
Speaker 1: have a huge impact on the future of a country,

544
00:29:30,360 --> 00:29:33,360
Speaker 1: in a society and an economy. Um. And so that's

545
00:29:33,680 --> 00:29:37,560
Speaker 1: actually what led me to start exploring these relationships speached

546
00:29:37,560 --> 00:29:40,000
Speaker 1: in the market. So it's funny you said governance matters.

547
00:29:40,360 --> 00:29:44,040
Speaker 1: I was discussing when we finally managed to book you

548
00:29:44,600 --> 00:29:48,120
Speaker 1: for the for the podcast. I was discussing this with

549
00:29:48,360 --> 00:29:50,760
Speaker 1: I won't mention their name, but we both know them,

550
00:29:51,360 --> 00:29:54,240
Speaker 1: and they said, well, how is what China is doing

551
00:29:54,280 --> 00:29:57,480
Speaker 1: to their tech sector any different than what Trump did

552
00:29:57,520 --> 00:29:59,880
Speaker 1: after he got elected? And I always find it weird

553
00:30:00,000 --> 00:30:03,400
Speaker 1: when I'm in a position of having to defend President Trump.

554
00:30:03,440 --> 00:30:09,080
Speaker 1: It's like, hey, you can't compare obnoxious tweets trashing a

555
00:30:09,160 --> 00:30:16,080
Speaker 1: company with actual government policies that forced companies to pay

556
00:30:16,080 --> 00:30:20,320
Speaker 1: a corrupt tax, have people added to their boards by force,

557
00:30:20,800 --> 00:30:25,000
Speaker 1: disregard the rule of law, sanctity of contracts, sanctity of

558
00:30:25,040 --> 00:30:29,320
Speaker 1: private property. As as crazy as the Trump era was,

559
00:30:30,200 --> 00:30:33,080
Speaker 1: it was a lot of noise at least until January six.

560
00:30:33,120 --> 00:30:35,720
Speaker 1: But I mean during the Trump administration, it was more

561
00:30:35,800 --> 00:30:41,000
Speaker 1: noise than actual policies such as we've seen in China. Yeah,

562
00:30:41,040 --> 00:30:43,840
Speaker 1: I think there's a few differences there now. For first,

563
00:30:43,680 --> 00:30:46,080
Speaker 1: I don't know who you're talking about, actually, but but

564
00:30:46,120 --> 00:30:48,520
Speaker 1: I want to say they have a point in that

565
00:30:48,680 --> 00:30:52,280
Speaker 1: every country has these issues, and it's just a different degrees, right,

566
00:30:52,280 --> 00:30:54,760
Speaker 1: So we may have had it. You know, we have

567
00:30:54,840 --> 00:30:58,360
Speaker 1: regulations that effect how our companies operate here Trump or

568
00:30:58,360 --> 00:31:02,360
Speaker 1: no Trump, And there's a certain degree of government interference

569
00:31:02,360 --> 00:31:06,600
Speaker 1: in private markets everywhere. Um So, so it does happen everywhere.

570
00:31:06,720 --> 00:31:09,320
Speaker 1: You know, we happen to be one of the least worst,

571
00:31:09,400 --> 00:31:12,320
Speaker 1: I think in the United States. Um and in China. Yeah,

572
00:31:12,360 --> 00:31:14,880
Speaker 1: it's very different. One reason is you can't push back

573
00:31:14,920 --> 00:31:18,600
Speaker 1: against it. So here, you see any kind of policy

574
00:31:18,640 --> 00:31:21,360
Speaker 1: going into place that people don't like, there's a huge

575
00:31:21,400 --> 00:31:24,080
Speaker 1: amount of pushback. You look at though, the protests post

576
00:31:24,160 --> 00:31:27,640
Speaker 1: Supreme Court overturning Roe v. Wade. If that had happened,

577
00:31:28,080 --> 00:31:29,800
Speaker 1: you can't do that if that happened China. Do you

578
00:31:29,800 --> 00:31:32,840
Speaker 1: think people could protest the one child policy in China? No.

579
00:31:33,440 --> 00:31:34,920
Speaker 1: Do you think they could protest when I went to

580
00:31:34,920 --> 00:31:36,480
Speaker 1: to child and they're like, why did you make me

581
00:31:36,560 --> 00:31:38,200
Speaker 1: only have one child? You know? And when I went

582
00:31:38,200 --> 00:31:41,240
Speaker 1: to three child, no, nobody could protest that. In fact,

583
00:31:41,320 --> 00:31:45,080
Speaker 1: it would. You would be prosecuted for protesting. You would

584
00:31:45,080 --> 00:31:48,200
Speaker 1: be disappeared. So I can't launch a fund like this

585
00:31:48,480 --> 00:31:51,520
Speaker 1: in Hong Kong. I mean I would be arrested because

586
00:31:51,520 --> 00:31:56,920
Speaker 1: of national security law. So the institutions in place right

587
00:31:57,040 --> 00:32:00,720
Speaker 1: are important for pushing back. For checks and balances, it

588
00:32:00,760 --> 00:32:03,000
Speaker 1: has to be a plurality of political parties, there has

589
00:32:03,040 --> 00:32:07,920
Speaker 1: to be a system of checks and balances, independent judiciary, UM.

590
00:32:07,960 --> 00:32:11,480
Speaker 1: There has to be a you know, uh, free media

591
00:32:11,640 --> 00:32:15,040
Speaker 1: as a force to keep government accountable. And so these

592
00:32:15,040 --> 00:32:18,080
Speaker 1: are all things that we find in freer markets that

593
00:32:18,120 --> 00:32:20,440
Speaker 1: we don't see in the less free ones. So you

594
00:32:20,480 --> 00:32:23,880
Speaker 1: can have a crazy person in charge, but if you

595
00:32:23,920 --> 00:32:26,600
Speaker 1: have stronger institutions, if you have some checks and balances,

596
00:32:27,360 --> 00:32:32,720
Speaker 1: free press, that keeps you know, power um from getting

597
00:32:32,720 --> 00:32:35,520
Speaker 1: out of hand. So so let's talk just for a

598
00:32:35,520 --> 00:32:39,960
Speaker 1: moment about Russia. Obviously they've become an anathema given the

599
00:32:40,000 --> 00:32:44,320
Speaker 1: invasion of Ukraine, but even before that, you didn't have

600
00:32:44,440 --> 00:32:48,480
Speaker 1: Russia in UM, the t F tell us the reasons

601
00:32:48,480 --> 00:32:52,480
Speaker 1: why a country like a Putin led Russia just doesn't

602
00:32:52,520 --> 00:32:55,080
Speaker 1: make it into a freedom index. Well, their their freedom

603
00:32:55,160 --> 00:32:57,320
Speaker 1: score from the think tanks was too low, and that's

604
00:32:57,360 --> 00:32:59,800
Speaker 1: why I didn't. How low is too low, so you

605
00:32:59,840 --> 00:33:03,960
Speaker 1: have to be higher than your peers. And our algorithm

606
00:33:04,000 --> 00:33:07,480
Speaker 1: assigns positive and negative weights. The negative weights are excluded,

607
00:33:07,600 --> 00:33:09,960
Speaker 1: so they were How low were they? Is what I'm

608
00:33:09,960 --> 00:33:12,880
Speaker 1: really getting to. So Russia ranks a six point to

609
00:33:13,080 --> 00:33:16,760
Speaker 1: three out of ten UM. As a comparison, Kuwait is

610
00:33:16,760 --> 00:33:19,959
Speaker 1: six point three four, India is six point three nine UM,

611
00:33:20,040 --> 00:33:22,960
Speaker 1: and then you get into included countries Philippines six point

612
00:33:22,960 --> 00:33:25,560
Speaker 1: eight three, Thailand six point eight nine, and so forth.

613
00:33:25,880 --> 00:33:28,960
Speaker 1: These are the kind of borderline countries. India is borderline

614
00:33:29,000 --> 00:33:32,560
Speaker 1: sometimes sometimes. Who are the top three in the bottom three?

615
00:33:32,840 --> 00:33:38,160
Speaker 1: So top three in emerging markets are Taiwan top one UM, Chile,

616
00:33:38,400 --> 00:33:43,200
Speaker 1: and South Korea currently, so South Korean Taiwan kind of

617
00:33:43,240 --> 00:33:45,960
Speaker 1: really no longer emerging markets, right, But you could say

618
00:33:45,960 --> 00:33:49,760
Speaker 1: the same about China, right, I mean, okay, well that

619
00:33:49,840 --> 00:33:53,120
Speaker 1: makes sense. And who are the bottom three? I can imagine, Yeah,

620
00:33:53,160 --> 00:33:56,280
Speaker 1: so bottom three in emerging markets Egypt, Saudi Arabia and China.

621
00:33:56,720 --> 00:34:01,080
Speaker 1: Saudi Arabia. Saudi Arabia ranks actually lower than China on

622
00:34:01,200 --> 00:34:04,400
Speaker 1: the overall score. It's five point one to China is

623
00:34:04,440 --> 00:34:09,799
Speaker 1: five point five seven um so and one fifty rank

624
00:34:09,840 --> 00:34:12,239
Speaker 1: out of one sixty countries in the world. So it

625
00:34:12,239 --> 00:34:15,120
Speaker 1: turns out that taking a bone saw to a journalist

626
00:34:15,200 --> 00:34:19,480
Speaker 1: and making him disappear isn't good for your freedom index. No,

627
00:34:20,040 --> 00:34:23,200
Speaker 1: they also have some women's freedom issues. Um, hey, they

628
00:34:23,200 --> 00:34:28,000
Speaker 1: can drive now, right, But in these kinds of markets,

629
00:34:28,000 --> 00:34:30,840
Speaker 1: in the free markets, you have to watch rhetoric versus

630
00:34:30,960 --> 00:34:33,480
Speaker 1: what actually happens on the correct um. A lot of

631
00:34:33,520 --> 00:34:36,880
Speaker 1: these reforms that NBS put into place, there was a

632
00:34:36,880 --> 00:34:39,440
Speaker 1: lot of hope in that country for BS to reform,

633
00:34:39,480 --> 00:34:41,279
Speaker 1: and you know, we had a lot of hope about

634
00:34:41,360 --> 00:34:43,680
Speaker 1: Egypt in the Arab Spring also before that all went

635
00:34:43,760 --> 00:34:45,520
Speaker 1: to hell and then you know, women were allowed to

636
00:34:45,600 --> 00:34:47,680
Speaker 1: drive all of a sudden. But at the same time

637
00:34:47,680 --> 00:34:50,640
Speaker 1: that the women were allowed to drive, they put four

638
00:34:52,000 --> 00:34:54,800
Speaker 1: women who had campaign for women to drive in jail.

639
00:34:55,120 --> 00:34:57,520
Speaker 1: One of them just was released, some of them are

640
00:34:57,560 --> 00:35:01,720
Speaker 1: still in jail. My friend uh manal al Sharif, who

641
00:35:02,960 --> 00:35:07,440
Speaker 1: is has been jailed for you know, UM campaigning for

642
00:35:07,480 --> 00:35:09,880
Speaker 1: women to drive in the past and is now exiled

643
00:35:09,880 --> 00:35:13,520
Speaker 1: in Australia. She did a whole women you know, women

644
00:35:13,520 --> 00:35:15,480
Speaker 1: to drive movement here in the United States at that

645
00:35:15,480 --> 00:35:18,319
Speaker 1: time to protest those women being in jail. So in

646
00:35:18,360 --> 00:35:20,720
Speaker 1: these countries you have to be very careful. There's always

647
00:35:20,800 --> 00:35:24,960
Speaker 1: rhetoric and there's always a big pr push to make

648
00:35:25,080 --> 00:35:28,840
Speaker 1: them seem like they're reforming when actually perhaps on the ground,

649
00:35:29,200 --> 00:35:32,400
Speaker 1: there's less of that going on in reality. Huh really

650
00:35:32,480 --> 00:35:36,080
Speaker 1: quite fascinating. We mentioned that you're now a five star

651
00:35:36,200 --> 00:35:39,680
Speaker 1: morning Star Funds, but when you were first rolled out

652
00:35:39,719 --> 00:35:45,480
Speaker 1: in the Index, was voted best New International Global E

653
00:35:45,680 --> 00:35:49,200
Speaker 1: t F and Index. Uh what made people so excited

654
00:35:49,239 --> 00:35:53,759
Speaker 1: about this theme back in Yeah, you know, that was

655
00:35:54,120 --> 00:35:57,280
Speaker 1: very a proud moment for us because that was voted

656
00:35:57,400 --> 00:36:00,480
Speaker 1: by UM, people in the t F and people in

657
00:36:00,520 --> 00:36:03,399
Speaker 1: the industry. Yeah. So first, you know, investors would put

658
00:36:03,400 --> 00:36:06,200
Speaker 1: in their kind of nominations and then a panel of

659
00:36:06,280 --> 00:36:09,960
Speaker 1: judges of E t F experts UM would vote and

660
00:36:10,000 --> 00:36:12,880
Speaker 1: so so I'm I'm very honored to have to have

661
00:36:13,000 --> 00:36:16,120
Speaker 1: that those awards. But I think what it was is

662
00:36:16,160 --> 00:36:20,239
Speaker 1: that UM intuitively investors. That's just understand that, you know,

663
00:36:20,280 --> 00:36:24,799
Speaker 1: freer countries have more sustainable growth, they recover faster from

664
00:36:24,880 --> 00:36:28,800
Speaker 1: draw downs, they use their capital more efficiently, whether it's personal, human,

665
00:36:28,880 --> 00:36:31,719
Speaker 1: or economic capital. So you know, capital goes where is

666
00:36:31,760 --> 00:36:34,600
Speaker 1: welcomed and where it's well treated. And that's Walter riskin

667
00:36:34,719 --> 00:36:38,439
Speaker 1: quote UM and capital is not just money, it's also

668
00:36:38,560 --> 00:36:41,480
Speaker 1: people and ideas. And you look at the capital outflows

669
00:36:41,480 --> 00:36:44,600
Speaker 1: coming from Russia right now, coming from Hong Kong UM

670
00:36:44,640 --> 00:36:48,280
Speaker 1: the millionaire exodus. There's I believe more millionaires per capita

671
00:36:48,320 --> 00:36:50,080
Speaker 1: coming out of Hong Kong than anywhere else at this

672
00:36:50,120 --> 00:36:54,440
Speaker 1: point UM and I think that just speaks to UM

673
00:36:54,560 --> 00:36:58,520
Speaker 1: the growth potential of the freer markets UM to be

674
00:36:58,680 --> 00:37:01,560
Speaker 1: the launch pads for growth in the next decade, so

675
00:37:01,840 --> 00:37:04,040
Speaker 1: especially in emerging markets where they're coming from this very

676
00:37:04,040 --> 00:37:06,839
Speaker 1: low base. So I think an emerging markets because there's

677
00:37:06,880 --> 00:37:09,080
Speaker 1: such a high concentration. And when we launched, I think

678
00:37:09,400 --> 00:37:14,040
Speaker 1: China weight was about and most emerging market Russia and

679
00:37:14,040 --> 00:37:17,240
Speaker 1: Saudi Arabia were in there. Right now, Russia's out, China's

680
00:37:17,280 --> 00:37:20,440
Speaker 1: down to like thirty, but it's still you know, kind

681
00:37:20,440 --> 00:37:22,400
Speaker 1: of a high concentration. Saudi Arabia is still in the

682
00:37:22,400 --> 00:37:24,319
Speaker 1: top ten. You still have Turkey, Egypt and all of

683
00:37:24,320 --> 00:37:28,160
Speaker 1: these others um so. So there's just a high concentration

684
00:37:28,200 --> 00:37:30,400
Speaker 1: of these autocracies. And I think people were at the

685
00:37:30,440 --> 00:37:34,280
Speaker 1: time saying, finally, there's a way to invest in emerging

686
00:37:34,280 --> 00:37:38,520
Speaker 1: markets without funding autocracies. Right. So it's not even e

687
00:37:38,760 --> 00:37:42,680
Speaker 1: m X China. It's e m X dictatorships. You're just

688
00:37:42,760 --> 00:37:45,600
Speaker 1: not participating in the worst It's very different from e

689
00:37:45,719 --> 00:37:48,839
Speaker 1: m X China. So X China just access China out

690
00:37:48,960 --> 00:37:52,440
Speaker 1: out of a market cap weighted index. It's not anything else.

691
00:37:52,800 --> 00:37:56,200
Speaker 1: It's just there is It's just an arbitrary exclusion, and

692
00:37:56,360 --> 00:37:59,280
Speaker 1: I think that's a band aid on a much deeper problem,

693
00:37:59,320 --> 00:38:01,480
Speaker 1: and it doesn't address the root issue, which is the

694
00:38:01,560 --> 00:38:04,240
Speaker 1: lack of freedom is the problem in China, not China itself.

695
00:38:04,400 --> 00:38:06,480
Speaker 1: So so you hinted at something with Hong Kong, and

696
00:38:06,520 --> 00:38:09,239
Speaker 1: I'm curious if you pay attention or track this in

697
00:38:09,280 --> 00:38:14,120
Speaker 1: any way. You mentioned the exodus of millionaires from Hong Kong.

698
00:38:14,520 --> 00:38:17,719
Speaker 1: I wonder what sort of brain drain takes place in

699
00:38:17,840 --> 00:38:22,160
Speaker 1: places like Hong Kong or China or Russia when the

700
00:38:22,239 --> 00:38:25,239
Speaker 1: country just takes a really bad turn in the wrong

701
00:38:25,280 --> 00:38:30,480
Speaker 1: direction and people finally say all right, no, Moss, I'm out. Yeah,

702
00:38:30,560 --> 00:38:33,040
Speaker 1: I mean I think that's a that's a pretty high

703
00:38:33,360 --> 00:38:35,920
Speaker 1: level of brain drain. I think without capital controls it

704
00:38:35,920 --> 00:38:38,800
Speaker 1: would be even higher. So these countries have those capital

705
00:38:38,800 --> 00:38:41,360
Speaker 1: controls for a reason. And how do you get capital

706
00:38:41,560 --> 00:38:46,200
Speaker 1: out of um countries like China or Hong Kong other

707
00:38:46,280 --> 00:38:50,040
Speaker 1: than buying condos in Vancouver? Very difficult? Yeah, I mean,

708
00:38:50,080 --> 00:38:52,800
Speaker 1: I don't know. I always always amazed anytime I visited

709
00:38:52,880 --> 00:38:59,600
Speaker 1: Vancouver about the sea through apartment buildings, which was apartments

710
00:38:59,640 --> 00:39:02,400
Speaker 1: owned people in China, and it was sort of their

711
00:39:02,440 --> 00:39:04,840
Speaker 1: safety nets and other countries not just you noticed all

712
00:39:04,880 --> 00:39:10,040
Speaker 1: the autocrats they send their children to school in the country. Yeah, absolutely,

713
00:39:10,080 --> 00:39:12,200
Speaker 1: What why is that they're not confident in their own

714
00:39:12,280 --> 00:39:16,360
Speaker 1: education systems? Yeah, I mean, I don't know. So you

715
00:39:16,440 --> 00:39:19,279
Speaker 1: wrote something I thought was kind of interesting, uh, and

716
00:39:19,320 --> 00:39:21,799
Speaker 1: I want to get some feedback on it. Bricks are

717
00:39:21,840 --> 00:39:25,399
Speaker 1: a good example of a nonsensical e M grouping made

718
00:39:25,480 --> 00:39:28,960
Speaker 1: up by Wall Street, now used by autocracies as a

719
00:39:29,080 --> 00:39:34,800
Speaker 1: dog whistle for forming alliances against the free world. Explain that. Yeah,

720
00:39:34,920 --> 00:39:38,840
Speaker 1: so that was prompted by a tweet um that I

721
00:39:38,880 --> 00:39:41,879
Speaker 1: saw that said Iran now wants to join the bricks Right,

722
00:39:41,920 --> 00:39:46,160
Speaker 1: so bricks was coined by an economist at Goldman Sachs

723
00:39:46,600 --> 00:39:54,680
Speaker 1: Um like two thousand one or something longer before that, right, Okay, Brazil, Russia, India, China,

724
00:39:54,960 --> 00:39:57,880
Speaker 1: South Africa. I was added laterally, Yeah, but but you know,

725
00:39:57,920 --> 00:40:02,360
Speaker 1: mostly Brazil, Russia, India, China, and UM. So they coined

726
00:40:02,360 --> 00:40:06,040
Speaker 1: that phrase, you know, grouping these countries. But there's nothing

727
00:40:06,320 --> 00:40:10,120
Speaker 1: in common among these countries except they're all emerging markets,

728
00:40:10,120 --> 00:40:13,200
Speaker 1: so they're all coming from a low base. So it

729
00:40:13,440 --> 00:40:16,320
Speaker 1: really made no sense except that it made an acronym.

730
00:40:16,400 --> 00:40:20,880
Speaker 1: And Wall Street, I think sometimes doesn't realize or consciously

731
00:40:20,960 --> 00:40:25,000
Speaker 1: denies its own powers. And you know, we created that acronym.

732
00:40:25,160 --> 00:40:30,440
Speaker 1: And then these countries started something called the Bricks Summit, right,

733
00:40:30,480 --> 00:40:33,040
Speaker 1: So now they're a summit, so kind of a competition

734
00:40:33,080 --> 00:40:36,720
Speaker 1: to the G seven and so forth. And now Iran

735
00:40:36,840 --> 00:40:42,080
Speaker 1: wants to join. So Sas is the guy who who

736
00:40:42,160 --> 00:40:44,319
Speaker 1: coined that. Okay, I'm not trying to call him out

737
00:40:44,360 --> 00:40:47,240
Speaker 1: or anything. I'm just saying in in on Wall Street,

738
00:40:47,360 --> 00:40:50,640
Speaker 1: we sometimes deny our own power and we create these

739
00:40:50,640 --> 00:40:55,440
Speaker 1: things meaninglessly just to sell product. And then the acronym

740
00:40:55,480 --> 00:41:03,120
Speaker 1: gets hijacked by autocrats to create alliances against the free world.

741
00:41:03,280 --> 00:41:06,200
Speaker 1: And so sometimes and that's a good example kind of

742
00:41:06,200 --> 00:41:09,439
Speaker 1: a visualization of what happens when we invest in these

743
00:41:09,440 --> 00:41:11,920
Speaker 1: on free markets as well, we lower the cost of

744
00:41:11,960 --> 00:41:14,920
Speaker 1: capital for these companies in these markets to do business.

745
00:41:15,280 --> 00:41:18,280
Speaker 1: There is a cost to doing business in a way

746
00:41:18,360 --> 00:41:22,319
Speaker 1: that puts state interests first. Every company in China has

747
00:41:22,360 --> 00:41:24,719
Speaker 1: to do that. I'm using China as an example, but

748
00:41:25,000 --> 00:41:28,279
Speaker 1: the same thing in Russia, Saudi Arabia, Egypt. I mean,

749
00:41:28,320 --> 00:41:31,640
Speaker 1: you see exppropriation in all these countries, UM, and the

750
00:41:31,680 --> 00:41:35,560
Speaker 1: state interests always come first. So that comes before your shareholders,

751
00:41:35,560 --> 00:41:39,239
Speaker 1: before yourselves, before your customers, UM. And there's a cost

752
00:41:39,239 --> 00:41:42,359
Speaker 1: of doing business that way, and we are subsidizing that

753
00:41:42,480 --> 00:41:47,880
Speaker 1: cost by investing in these places, in these in these companies.

754
00:41:48,080 --> 00:41:51,880
Speaker 1: And also these companies typically have very poor accounting standards,

755
00:41:51,960 --> 00:41:55,960
Speaker 1: very poor transparency. We don't know who the actual owners are,

756
00:41:56,040 --> 00:41:59,200
Speaker 1: and so you could directly be enriching autocrats and their

757
00:41:59,239 --> 00:42:02,200
Speaker 1: cronies because we don't know the ownership of a lot

758
00:42:02,239 --> 00:42:05,799
Speaker 1: of these As long as the regulators are getting there

759
00:42:06,360 --> 00:42:08,399
Speaker 1: a little payoff on the side, what do they care

760
00:42:08,440 --> 00:42:10,760
Speaker 1: if the accounting is right as long as their numbers.

761
00:42:11,000 --> 00:42:13,640
Speaker 1: And we have ourselves to blame for that. It's our

762
00:42:13,680 --> 00:42:16,520
Speaker 1: regulators that allowed this, our lawyers who wanted to make

763
00:42:16,560 --> 00:42:19,319
Speaker 1: money from this, our investment bankers, and our you know,

764
00:42:19,600 --> 00:42:22,239
Speaker 1: Wall Street us. So we have a lot to be

765
00:42:22,320 --> 00:42:25,880
Speaker 1: responsible for here. And I think sometimes Wall Street, you know,

766
00:42:26,000 --> 00:42:29,160
Speaker 1: carelessly makes these things up like bricks. Okay, what is that?

767
00:42:29,200 --> 00:42:31,120
Speaker 1: You know? It doesn't make any sense. And I think

768
00:42:31,160 --> 00:42:33,520
Speaker 1: you know now now people are realizing that, and it's

769
00:42:33,560 --> 00:42:36,960
Speaker 1: pretty much dead as a grouping an emerging markets investing

770
00:42:37,000 --> 00:42:39,000
Speaker 1: at least, But now we still have the Brick Summit

771
00:42:39,040 --> 00:42:42,520
Speaker 1: and Eyrong wants to join. So there's a lasting consequence

772
00:42:42,560 --> 00:42:46,920
Speaker 1: to our actions. When you're in a position to direct assets,

773
00:42:46,960 --> 00:42:49,719
Speaker 1: whether it's your own assets or someone else's assets, that

774
00:42:49,880 --> 00:42:52,399
Speaker 1: is a position of power and privilege, and we could

775
00:42:52,480 --> 00:42:55,480
Speaker 1: use that power for good or not. And in emerging

776
00:42:55,520 --> 00:42:59,319
Speaker 1: markets there is no neutral huh. Really really interesting. I

777
00:42:59,360 --> 00:43:02,120
Speaker 1: recall re not too long ago, and it actually might

778
00:43:02,160 --> 00:43:06,040
Speaker 1: have been on Twitter that the A A share investors,

779
00:43:06,080 --> 00:43:09,520
Speaker 1: meaning the local investors in China get treated very different

780
00:43:09,560 --> 00:43:13,040
Speaker 1: than the B share investors. And if you were a

781
00:43:13,040 --> 00:43:17,279
Speaker 1: B share investor in China since nine you haven't done

782
00:43:17,320 --> 00:43:21,440
Speaker 1: that well, whereas the A share investors did pretty good. Yeah.

783
00:43:21,440 --> 00:43:24,279
Speaker 1: So the n c h I Index, which is the

784
00:43:24,400 --> 00:43:28,760
Speaker 1: MSCI China Index, tracks both on shore and offshore shares,

785
00:43:28,800 --> 00:43:33,320
Speaker 1: a very complete picture of investing in China. UM since

786
00:43:33,320 --> 00:43:38,520
Speaker 1: its inception in it has had lower than treasury like returns,

787
00:43:38,600 --> 00:43:41,800
Speaker 1: so lower than for the B share the outside, for

788
00:43:42,239 --> 00:43:45,600
Speaker 1: both on shore and off shore. Really yeah, together, So

789
00:43:46,360 --> 00:43:49,719
Speaker 1: for thirty years of the biggest growth spirit of any

790
00:43:49,719 --> 00:43:54,160
Speaker 1: country on a on an extended basis, and it didn't

791
00:43:54,160 --> 00:43:57,640
Speaker 1: be treasuries. Correct, it's abysmal. And and now why is that?

792
00:43:57,719 --> 00:44:00,880
Speaker 1: Is that because so much skim was taken off the top.

793
00:44:01,120 --> 00:44:06,640
Speaker 1: There's a lot of dilusion, there's expropriation, there's expropriation that

794
00:44:07,160 --> 00:44:11,560
Speaker 1: so expropriation I define that as UM basically nice business

795
00:44:11,560 --> 00:44:14,960
Speaker 1: you got there, Shame something happened to it. Yeah, so

796
00:44:14,960 --> 00:44:17,759
Speaker 1: so government. You know, for example, in Egypt, there was

797
00:44:18,280 --> 00:44:22,120
Speaker 1: the largest dairy company. The government wanted to take it over.

798
00:44:22,600 --> 00:44:25,520
Speaker 1: The founder said no, He was put in prison. His

799
00:44:25,600 --> 00:44:28,720
Speaker 1: son said no, was also put in prison with him.

800
00:44:28,760 --> 00:44:32,640
Speaker 1: So this happens in all these unfree markets, not just China. Um,

801
00:44:32,719 --> 00:44:34,440
Speaker 1: I know, I pick on China alot or seem to

802
00:44:34,480 --> 00:44:37,440
Speaker 1: because they're just such a great example there exhibit A

803
00:44:37,280 --> 00:44:40,080
Speaker 1: for all of this stuff right now. So so yeah,

804
00:44:40,160 --> 00:44:42,520
Speaker 1: that you know that happens in all of these countries,

805
00:44:42,560 --> 00:44:47,400
Speaker 1: and China specifically. You see this major drag on emerging

806
00:44:47,400 --> 00:44:49,640
Speaker 1: markets indexes as a whole because they have such a

807
00:44:49,760 --> 00:44:53,400
Speaker 1: large allocation, and so emerging markets as a whole hasn't

808
00:44:53,440 --> 00:44:56,440
Speaker 1: done that well in the last decade or more so.

809
00:44:56,440 --> 00:45:00,279
Speaker 1: So that leads to the opposite question. If invest sing

810
00:45:00,280 --> 00:45:04,400
Speaker 1: in these autocracies and on free countries help some of

811
00:45:04,440 --> 00:45:08,640
Speaker 1: the worst leaders in the world, what is the positive

812
00:45:08,719 --> 00:45:13,000
Speaker 1: for investing in the freer countries that respect economic freedom

813
00:45:13,040 --> 00:45:17,400
Speaker 1: and individual liberty? Yeah, so so freer countries have a

814
00:45:17,440 --> 00:45:20,520
Speaker 1: lot of benefits that are beyond even economic benefits. They

815
00:45:20,520 --> 00:45:24,560
Speaker 1: have higher life expectancies, they have lower infor mortality, they

816
00:45:24,560 --> 00:45:28,520
Speaker 1: have lower gender inequality or higher gender equality. They have

817
00:45:28,640 --> 00:45:32,200
Speaker 1: higher GDP growth, higher income per capita, lower poverty rates,

818
00:45:32,480 --> 00:45:37,560
Speaker 1: even their poorest quarter of their incomes are much wealthier

819
00:45:38,000 --> 00:45:42,440
Speaker 1: in the top quartile freest countries than the bottom quartile

820
00:45:43,000 --> 00:45:45,960
Speaker 1: of you know, the least free countries. So the bottom.

821
00:45:46,480 --> 00:45:49,439
Speaker 1: The poorest people in the freer countries are much better

822
00:45:49,480 --> 00:45:53,000
Speaker 1: off just by being in a freer country. Um. So,

823
00:45:53,000 --> 00:45:57,120
Speaker 1: so all of these benefits of freedom are kind of nebulous.

824
00:45:57,160 --> 00:46:00,279
Speaker 1: They're hard to visualize. And when we try to do

825
00:46:00,360 --> 00:46:03,400
Speaker 1: with the f R d M Index is to be

826
00:46:03,480 --> 00:46:05,840
Speaker 1: a scorecard of running a scorecard for freedom in the

827
00:46:05,880 --> 00:46:08,320
Speaker 1: emerging markets, because yeah, there are a lot of benefits

828
00:46:08,400 --> 00:46:12,239
Speaker 1: investment wise. They these are the countries that have more

829
00:46:12,239 --> 00:46:15,680
Speaker 1: sustainable growth, recover faster from draw downs. We saw this

830
00:46:15,760 --> 00:46:18,680
Speaker 1: in a sustainable growth, meaning you know there, it's not

831
00:46:18,960 --> 00:46:21,560
Speaker 1: government mandated debt driven growth, kind of like you saw

832
00:46:21,600 --> 00:46:24,440
Speaker 1: in China again Exhibit A. You know, ever, grand we

833
00:46:24,480 --> 00:46:26,359
Speaker 1: didn't know there was a problem until it was too late,

834
00:46:26,440 --> 00:46:28,839
Speaker 1: and that's you know, one of the problems with this

835
00:46:28,960 --> 00:46:32,600
Speaker 1: kind of growth is that lack of transparency UM, the

836
00:46:32,640 --> 00:46:35,520
Speaker 1: debt driven nature of it UM and it just causes

837
00:46:35,560 --> 00:46:38,520
Speaker 1: this problems that become too big to fix. So since

838
00:46:38,560 --> 00:46:41,480
Speaker 1: you launched the Freedom Index, have you been back to China?

839
00:46:41,600 --> 00:46:44,439
Speaker 1: I have not for Hong Kong, for not even Hong Kong,

840
00:46:44,480 --> 00:46:46,160
Speaker 1: and I love Hong Kong so much and I wish

841
00:46:46,160 --> 00:46:48,919
Speaker 1: I could go back, but because of the National security law.

842
00:46:49,800 --> 00:46:53,360
Speaker 1: It's best that I don't you actually are concerned that

843
00:46:53,400 --> 00:46:56,320
Speaker 1: if you show up as the founder of this index

844
00:46:56,480 --> 00:46:59,640
Speaker 1: in Hong Kong or China, you could be arrested. Uh

845
00:47:00,080 --> 00:47:03,960
Speaker 1: don't want to. I don't want to test that fair enough.

846
00:47:03,960 --> 00:47:07,520
Speaker 1: So then let me ask you a subtler question. Do

847
00:47:07,560 --> 00:47:09,919
Speaker 1: you ever get pushed back from countries that are left

848
00:47:09,920 --> 00:47:12,960
Speaker 1: out of the indext you hear from different players? Yes,

849
00:47:13,000 --> 00:47:16,600
Speaker 1: I do, and and that's always interesting because, um then

850
00:47:16,600 --> 00:47:17,759
Speaker 1: I had to get used to that because you know,

851
00:47:17,800 --> 00:47:23,879
Speaker 1: working at Fidelity a very conservative corporate culture. But yes,

852
00:47:24,360 --> 00:47:28,840
Speaker 1: we never really had anything to be criticized about. And

853
00:47:28,840 --> 00:47:32,239
Speaker 1: if you didn't like something I you know, suggested, you know,

854
00:47:32,320 --> 00:47:34,600
Speaker 1: you blamed your in tim or whoever I was getting

855
00:47:34,600 --> 00:47:38,879
Speaker 1: my research from, right. Um so, so that, by the way,

856
00:47:38,920 --> 00:47:41,920
Speaker 1: has a great Twitter feed, he really does. It's really

857
00:47:42,000 --> 00:47:44,520
Speaker 1: the most interesting of all the Fidelity I have to say.

858
00:47:45,719 --> 00:47:49,319
Speaker 1: But anyway, pushback, who who's pushed back on you? So

859
00:47:49,520 --> 00:47:53,560
Speaker 1: it's interesting because I've heard pushback from multiple countries, but

860
00:47:53,600 --> 00:47:56,399
Speaker 1: the pushback is different depending on the country it's coming from.

861
00:47:56,440 --> 00:48:00,840
Speaker 1: I've noticed that from Chinese investors in Hong Kong, I

862
00:48:00,920 --> 00:48:07,239
Speaker 1: get very virulent pushback, like very angry and um, hey

863
00:48:07,280 --> 00:48:10,040
Speaker 1: you know you don't. You don't. The data set you

864
00:48:10,080 --> 00:48:15,840
Speaker 1: work off of comes from Fraser and yeah, exactly numbers

865
00:48:15,960 --> 00:48:18,279
Speaker 1: get from them. I'm not even massaging the numbers. I'm

866
00:48:18,320 --> 00:48:22,239
Speaker 1: literally just putting the numbers as inputs into my algorithm. Yeah,

867
00:48:22,280 --> 00:48:26,360
Speaker 1: and my algorithm is coming out with the inclusions. And

868
00:48:26,400 --> 00:48:29,760
Speaker 1: so from China, I get a lot of pushback in

869
00:48:29,840 --> 00:48:32,080
Speaker 1: a less civil way, but you know, there's there's still

870
00:48:32,120 --> 00:48:33,960
Speaker 1: some of them make good points, and I've taken some

871
00:48:34,040 --> 00:48:37,560
Speaker 1: of that to to heart and and change parts of

872
00:48:37,560 --> 00:48:40,440
Speaker 1: our index. One of the things that I really valued

873
00:48:40,560 --> 00:48:43,360
Speaker 1: from that feedback in the very beginning is that somebody

874
00:48:43,440 --> 00:48:46,920
Speaker 1: pointed out, hey, you have a South African company, Naspers,

875
00:48:47,440 --> 00:48:50,920
Speaker 1: which is all of the their entire market cap consists

876
00:48:50,960 --> 00:48:55,239
Speaker 1: of ten cent and so you're essentially that's interesting. This

877
00:48:55,280 --> 00:48:58,200
Speaker 1: is a quantitative strategy if the company is based in

878
00:48:58,200 --> 00:49:01,239
Speaker 1: South Africa, and South Africa's included, but it's really a Chinese.

879
00:49:02,640 --> 00:49:05,560
Speaker 1: So we actually, at the rebalance of that following year

880
00:49:05,680 --> 00:49:10,200
Speaker 1: made a rule that if more than of your assets

881
00:49:10,239 --> 00:49:13,320
Speaker 1: are made up of the shares of another company, then

882
00:49:13,400 --> 00:49:16,120
Speaker 1: in that company is in an excluded country, then you're out,

883
00:49:16,320 --> 00:49:19,560
Speaker 1: and so so they really, you know, regardless of who

884
00:49:19,560 --> 00:49:23,640
Speaker 1: the messenger is, the message was helpful. And but what

885
00:49:23,719 --> 00:49:26,239
Speaker 1: I found is that in the more free or the

886
00:49:26,360 --> 00:49:29,400
Speaker 1: you know, borderline countries that sometimes get included, sometimes don't.

887
00:49:29,680 --> 00:49:32,080
Speaker 1: I was in New York a few years ago when

888
00:49:32,239 --> 00:49:34,640
Speaker 1: Brazil was not included in the fund, and I was

889
00:49:34,680 --> 00:49:37,160
Speaker 1: in a subway and I ran into a couple of

890
00:49:37,320 --> 00:49:41,000
Speaker 1: Brazilian UM human rights lawyers and so we were all

891
00:49:41,040 --> 00:49:44,080
Speaker 1: waiting for the same like late train and UM. And

892
00:49:44,200 --> 00:49:46,080
Speaker 1: I found out they worked in human rights and I

893
00:49:46,160 --> 00:49:47,719
Speaker 1: was there for a human rights event, and so we

894
00:49:47,719 --> 00:49:49,560
Speaker 1: started talking and they were like, hey, it's Brazil and

895
00:49:49,600 --> 00:49:52,200
Speaker 1: your index. And I was like no, and they were like, yeah,

896
00:49:52,200 --> 00:49:56,400
Speaker 1: that sounds about right. So I think countries, you know,

897
00:49:56,520 --> 00:49:58,960
Speaker 1: different people from different countries tend to react differently to

898
00:49:59,080 --> 00:50:02,319
Speaker 1: not being included. UM, India, right, I have a lot

899
00:50:02,320 --> 00:50:05,040
Speaker 1: of Indian Um, we have a lot of Indian fans actually,

900
00:50:05,080 --> 00:50:07,120
Speaker 1: because you know, India tends to have a lot of

901
00:50:07,160 --> 00:50:09,319
Speaker 1: fights with China, so so they like that we don't

902
00:50:09,360 --> 00:50:11,680
Speaker 1: have China, but we also now don't have India. And

903
00:50:11,760 --> 00:50:15,759
Speaker 1: because India a couple of years ago, UM, increased their

904
00:50:15,800 --> 00:50:21,000
Speaker 1: repression of the cashmere people. They had increased um incidences

905
00:50:21,080 --> 00:50:25,239
Speaker 1: of government intervention in media, and they blacked out protests

906
00:50:25,280 --> 00:50:28,560
Speaker 1: in places that had um or blacked out the internet

907
00:50:28,600 --> 00:50:30,960
Speaker 1: in places that we're going to have protests, the farmers protests.

908
00:50:31,120 --> 00:50:33,640
Speaker 1: And so because of that, their score dropped, and because

909
00:50:33,640 --> 00:50:38,320
Speaker 1: their score dropped, they became excluded, and uh, they dropped

910
00:50:38,360 --> 00:50:40,520
Speaker 1: lower than Brazil, and Brazil got bumped up. So it's

911
00:50:40,520 --> 00:50:44,520
Speaker 1: all relative, right, So um, after that happened, I didn't

912
00:50:44,600 --> 00:50:47,200
Speaker 1: hear much. But when I do, you know, personal speaking

913
00:50:47,280 --> 00:50:50,279
Speaker 1: in person, um, I do hear from Indian you know,

914
00:50:50,320 --> 00:50:53,080
Speaker 1: audience members. I say, hey, India should really be in there,

915
00:50:53,120 --> 00:50:54,320
Speaker 1: you know, and they give me all these reasons, and

916
00:50:54,360 --> 00:50:56,400
Speaker 1: I'm like, I completely agree with you. I love India,

917
00:50:57,160 --> 00:51:00,640
Speaker 1: you know. Unfortunately my subjective opinion does matter at all,

918
00:51:00,719 --> 00:51:02,319
Speaker 1: doesn't factor in at all. But you know, is a

919
00:51:02,320 --> 00:51:04,040
Speaker 1: borderline country and it could make it back in it

920
00:51:04,040 --> 00:51:05,880
Speaker 1: any time. You know. For a long time, it looked

921
00:51:05,880 --> 00:51:11,080
Speaker 1: like Brazil was really going to be a very modern, democratic,

922
00:51:11,680 --> 00:51:16,560
Speaker 1: industrialized nation. But like so many other countries in South America,

923
00:51:16,760 --> 00:51:21,400
Speaker 1: they seem to have you know, faltered, stumbled a little

924
00:51:21,400 --> 00:51:23,920
Speaker 1: bit of all the countries that are right in that

925
00:51:24,080 --> 00:51:27,400
Speaker 1: borderline zone, what do you think are the ones most

926
00:51:27,440 --> 00:51:30,400
Speaker 1: likely to end up back in the index over the

927
00:51:30,400 --> 00:51:34,120
Speaker 1: next couple of years. I do think India is very

928
00:51:34,160 --> 00:51:38,400
Speaker 1: likely to make it back in there. They have some issues, UM,

929
00:51:38,440 --> 00:51:42,840
Speaker 1: but I think they have enough diversity of viewpoints to

930
00:51:42,920 --> 00:51:46,680
Speaker 1: kind of push back and push through UM, I hope.

931
00:51:46,800 --> 00:51:50,799
Speaker 1: And they have very favorable or more favorable demographics since

932
00:51:51,040 --> 00:51:54,920
Speaker 1: some other countries, UM, so I think they they can

933
00:51:55,239 --> 00:51:59,080
Speaker 1: possibly make it back in. I think Malaysia is currently

934
00:51:59,120 --> 00:52:00,879
Speaker 1: in and it's one of those I think we'll stay

935
00:52:00,920 --> 00:52:04,320
Speaker 1: in there making some you know, reform progress. Colombia is

936
00:52:04,360 --> 00:52:07,360
Speaker 1: an interesting one that I thought was gonna become more

937
00:52:07,400 --> 00:52:09,439
Speaker 1: like more likely to come in, but now they're having

938
00:52:09,480 --> 00:52:13,320
Speaker 1: some issues. UM. And the reason I like to Columbia

939
00:52:13,360 --> 00:52:17,040
Speaker 1: is because they were benefiting from the human migration from Venezuela.

940
00:52:18,080 --> 00:52:21,320
Speaker 1: And I like these countries that are in places where, um,

941
00:52:21,360 --> 00:52:23,960
Speaker 1: there next to a very unfree market and they're like

942
00:52:23,960 --> 00:52:26,160
Speaker 1: the beacon of freedom in their region, you know, like

943
00:52:26,200 --> 00:52:30,320
Speaker 1: Taiwan or um, Columbia or in this you know right now, Poland.

944
00:52:30,640 --> 00:52:36,640
Speaker 1: Where does Mexico fit into the It's low but it's included. Yeah,

945
00:52:37,080 --> 00:52:40,240
Speaker 1: so so yeah, I know these are the interesting countries.

946
00:52:40,239 --> 00:52:42,640
Speaker 1: And what I find even more interesting that we don't

947
00:52:42,640 --> 00:52:46,480
Speaker 1: currently you know, have a product for is frontier markets.

948
00:52:46,960 --> 00:52:51,399
Speaker 1: There's some very free frontier markets still. Yeah, it's like

949
00:52:52,320 --> 00:52:55,080
Speaker 1: freer than the US on the rankings, much higher. It's

950
00:52:55,080 --> 00:52:58,440
Speaker 1: like a number five US is like number fifteen, so

951
00:52:58,680 --> 00:53:01,359
Speaker 1: and that's a that was four last week. Yeah, and

952
00:53:01,360 --> 00:53:03,400
Speaker 1: and they would be they would be very offended to

953
00:53:03,440 --> 00:53:06,160
Speaker 1: be called a frontier market. But I'm just talking about

954
00:53:06,160 --> 00:53:09,960
Speaker 1: size and give me some frontier. Who else Uruguay which

955
00:53:10,040 --> 00:53:12,360
Speaker 1: is actually not even classified as frontier I believe by

956
00:53:12,480 --> 00:53:16,200
Speaker 1: ms C. It's not not even classified. Um it's it's

957
00:53:16,239 --> 00:53:19,680
Speaker 1: you know, got some very interesting fintech companies and just

958
00:53:19,920 --> 00:53:23,440
Speaker 1: it's ranked very free. So how about any countries in

959
00:53:23,480 --> 00:53:27,680
Speaker 1: Africa that are on the border. You know what, I

960
00:53:27,680 --> 00:53:30,359
Speaker 1: don't know of any off hand in Africa that are

961
00:53:30,400 --> 00:53:33,120
Speaker 1: on the border Nigeria. I was about to say, Yer

962
00:53:33,200 --> 00:53:35,920
Speaker 1: and Nigeria. Where are they in your in your rankings?

963
00:53:36,200 --> 00:53:39,799
Speaker 1: So Nigeria actually is six point to eight out of

964
00:53:39,880 --> 00:53:44,960
Speaker 1: ten um, which is higher than you know, Russia, Cutter UAE,

965
00:53:45,120 --> 00:53:48,319
Speaker 1: which are emerging markets. But it's not higher than you know,

966
00:53:48,600 --> 00:53:51,120
Speaker 1: India and so forth. So so yeah, it's still not

967
00:53:51,239 --> 00:53:53,920
Speaker 1: free enough. If we were to make a frontier market index,

968
00:53:53,960 --> 00:53:55,560
Speaker 1: it still would not be free enough to be in there.

969
00:53:55,640 --> 00:53:59,759
Speaker 1: So here's the question. Are there enough large liquid companies

970
00:54:00,040 --> 00:54:04,719
Speaker 1: in all the frontier markets to create an index? Right now?

971
00:54:04,760 --> 00:54:08,160
Speaker 1: We think the answer to that is no, but eventually

972
00:54:08,320 --> 00:54:10,760
Speaker 1: it might be yeah. And there's other ways of solving

973
00:54:10,800 --> 00:54:14,960
Speaker 1: that problem possibly. Um So, if any listeners are market makers,

974
00:54:15,040 --> 00:54:17,200
Speaker 1: or if you want to help us make a market

975
00:54:17,239 --> 00:54:19,640
Speaker 1: and some of these names, please get in touch, because

976
00:54:19,719 --> 00:54:22,920
Speaker 1: we would love to solve this problem and make something

977
00:54:22,920 --> 00:54:25,200
Speaker 1: like an e t F that's available for all investors. Obviously,

978
00:54:25,239 --> 00:54:27,359
Speaker 1: we can make a you know, hedge fund or something,

979
00:54:27,400 --> 00:54:30,080
Speaker 1: but I would much prefer to have an ETS structure.

980
00:54:30,120 --> 00:54:32,480
Speaker 1: So so, so, last question before I get to my

981
00:54:32,560 --> 00:54:36,240
Speaker 1: favorite questions. You mentioned you miss Hong Kong a lot.

982
00:54:36,960 --> 00:54:40,800
Speaker 1: What do you miss most about Hong Kong? Okay, So,

983
00:54:41,600 --> 00:54:44,799
Speaker 1: Hong Kong was like New York on speed Times one.

984
00:54:45,760 --> 00:54:48,680
Speaker 1: New York on steroids is how everybody describes Hong Kong's

985
00:54:48,719 --> 00:54:51,759
Speaker 1: Really Yeah, New York just like New York Times ten,

986
00:54:51,960 --> 00:54:54,960
Speaker 1: just massive. Yeah, I loved that about it's just the

987
00:54:55,040 --> 00:54:58,680
Speaker 1: speed and the size, the number, the sheer number of people,

988
00:54:59,400 --> 00:55:05,000
Speaker 1: the stability of um, everything you can do there them,

989
00:55:06,760 --> 00:55:10,719
Speaker 1: the respect for commerce, the efficiency. UM. It was just

990
00:55:10,760 --> 00:55:13,560
Speaker 1: such an exciting place that the lights, I mean, the

991
00:55:14,239 --> 00:55:16,320
Speaker 1: if you look at the city at night, it's beautiful.

992
00:55:16,880 --> 00:55:22,160
Speaker 1: It's got world class you know everything and Hong Kong.

993
00:55:22,440 --> 00:55:24,960
Speaker 1: So that's a very difficult question because there's a lot

994
00:55:25,040 --> 00:55:28,239
Speaker 1: of good food Hunko. It's like New York. There was

995
00:55:28,280 --> 00:55:29,920
Speaker 1: a you know, I don't even remember all the names.

996
00:55:29,920 --> 00:55:33,400
Speaker 1: There was a Tapa's place in mid Levels, which I loved.

997
00:55:33,560 --> 00:55:36,879
Speaker 1: There was a Indian place with the most incredible non

998
00:55:37,840 --> 00:55:40,000
Speaker 1: m on the Peak that I loved. But I think

999
00:55:40,080 --> 00:55:44,240
Speaker 1: if I had to pick one, I'm I really miss

1000
00:55:44,440 --> 00:55:47,640
Speaker 1: going to this place called trey Wah and it was

1001
00:55:48,200 --> 00:55:51,720
Speaker 1: it's basically like a ihop, like it's an open twenty

1002
00:55:51,719 --> 00:55:53,880
Speaker 1: four hours and it's the one we went to was

1003
00:55:53,920 --> 00:55:56,000
Speaker 1: in Central which I think it's actually closed now due

1004
00:55:56,040 --> 00:56:00,200
Speaker 1: to COVID. But um, that's where you go at night

1005
00:56:00,239 --> 00:56:02,360
Speaker 1: if you stayed up too late with your friends and

1006
00:56:02,400 --> 00:56:04,279
Speaker 1: stayed out and you just want to go and eat.

1007
00:56:05,120 --> 00:56:07,320
Speaker 1: I just had the best memories there. I just remember

1008
00:56:07,360 --> 00:56:10,640
Speaker 1: you know, hanging out with friends there, you know, in

1009
00:56:10,719 --> 00:56:13,640
Speaker 1: early morning hours. I'm a night person, having the best time.

1010
00:56:13,719 --> 00:56:16,200
Speaker 1: And so that's actually what I missed the most, which

1011
00:56:16,239 --> 00:56:19,080
Speaker 1: is which is like the cheapest like restaurant you could

1012
00:56:19,080 --> 00:56:21,160
Speaker 1: think of there, but it's it's where I had the

1013
00:56:21,200 --> 00:56:23,359
Speaker 1: best memories. So in New York that would be Woe

1014
00:56:23,440 --> 00:56:26,560
Speaker 1: Hops down in Chinatown that was four hours a day.

1015
00:56:26,760 --> 00:56:30,279
Speaker 1: I remember in college, mean, Buddy's piling its three in

1016
00:56:30,320 --> 00:56:34,000
Speaker 1: the morning and it was I think they're still around

1017
00:56:34,040 --> 00:56:36,239
Speaker 1: and still open twenty four hours a day. It's just

1018
00:56:36,400 --> 00:56:38,680
Speaker 1: it's just not I don't even remember the food. I

1019
00:56:38,680 --> 00:56:40,520
Speaker 1: think the food was like secondary. It was like some

1020
00:56:40,640 --> 00:56:44,320
Speaker 1: weird toast um, you know, and tea or something. But

1021
00:56:44,320 --> 00:56:46,800
Speaker 1: but yeah, no, it was it was the best memories,

1022
00:56:47,000 --> 00:56:49,400
Speaker 1: all right. So let's jump to our favorite questions that

1023
00:56:49,520 --> 00:56:52,520
Speaker 1: we ask all of our guests, starting with what have

1024
00:56:52,560 --> 00:56:55,120
Speaker 1: you been streaming during lockdown? Tell us what's been keeping

1025
00:56:56,360 --> 00:56:58,920
Speaker 1: I saw Hobbs and Shawl the other day and I

1026
00:56:58,960 --> 00:57:03,480
Speaker 1: was like, I have missed so many Fast and Furious movies,

1027
00:57:03,520 --> 00:57:06,759
Speaker 1: and so I started from the beginning and now I'm

1028
00:57:06,760 --> 00:57:10,040
Speaker 1: on I just I just finished six and so because

1029
00:57:10,080 --> 00:57:13,960
Speaker 1: I stopped going to those movies after college, and the

1030
00:57:14,040 --> 00:57:16,320
Speaker 1: last one I saw was Tokyo Drift, and I have

1031
00:57:16,440 --> 00:57:19,400
Speaker 1: no memory of you know, pre like two thousand four,

1032
00:57:19,480 --> 00:57:22,040
Speaker 1: so I basically had to watch them all over again.

1033
00:57:22,080 --> 00:57:24,280
Speaker 1: Were you a drift girl? Will you out in two

1034
00:57:25,160 --> 00:57:29,480
Speaker 1: x is? Going sideways around tracks? You know? That's you

1035
00:57:29,480 --> 00:57:34,680
Speaker 1: know I didn't. Actually that's d because I know people

1036
00:57:34,760 --> 00:57:38,040
Speaker 1: who still to this day do that. No, I did not.

1037
00:57:38,120 --> 00:57:41,360
Speaker 1: I was not part of that. It's a funny run

1038
00:57:41,640 --> 00:57:45,360
Speaker 1: of films because it's about this tiny little subculture and

1039
00:57:45,400 --> 00:57:47,720
Speaker 1: they blow it up as if it's like the only

1040
00:57:47,760 --> 00:57:49,840
Speaker 1: thing that really matters. But what I love about that

1041
00:57:49,920 --> 00:57:51,440
Speaker 1: is some of these quotes that they have, and I

1042
00:57:51,480 --> 00:57:55,200
Speaker 1: love like badass women characters. So like Letty in the

1043
00:57:55,280 --> 00:57:58,240
Speaker 1: Latest One said something like you know that after she

1044
00:57:58,280 --> 00:57:59,920
Speaker 1: lost her memory, and she was like, you know what,

1045
00:58:00,040 --> 00:58:02,439
Speaker 1: I may not remember much, but I know one thing.

1046
00:58:02,760 --> 00:58:04,439
Speaker 1: No one would have ever made me. And he made

1047
00:58:04,440 --> 00:58:07,280
Speaker 1: me do anything I didn't want to do because somebody

1048
00:58:07,280 --> 00:58:10,040
Speaker 1: else was blaming themselves for the trouble that she got into.

1049
00:58:10,080 --> 00:58:12,120
Speaker 1: And she was like, no, I wouldn't have done that

1050
00:58:12,200 --> 00:58:13,960
Speaker 1: if I didn't want to do it. And so I

1051
00:58:14,000 --> 00:58:17,840
Speaker 1: love that and I love how UM in Tokyo drift

1052
00:58:18,000 --> 00:58:20,760
Speaker 1: Han was like, I have money, I need trust and

1053
00:58:20,880 --> 00:58:23,560
Speaker 1: character around me. It's like all of these little quotes

1054
00:58:23,600 --> 00:58:26,440
Speaker 1: that it was just the sense of loyalty, and I

1055
00:58:26,480 --> 00:58:28,520
Speaker 1: just I just love the brotherhood about the movie. But

1056
00:58:28,840 --> 00:58:32,840
Speaker 1: the philosophy of fast and furious. Who knew that was UM?

1057
00:58:33,040 --> 00:58:36,480
Speaker 1: Second question, tell us about your mentors who helped to

1058
00:58:36,600 --> 00:58:42,840
Speaker 1: shape your career. I mean, you hear the quote that, UM,

1059
00:58:42,920 --> 00:58:44,720
Speaker 1: if you're the smartest person in the room, you're in

1060
00:58:44,720 --> 00:58:48,160
Speaker 1: the wrong room, right, And I can I can say

1061
00:58:48,360 --> 00:58:51,360
Speaker 1: in this business, I have never been in the wrong room.

1062
00:58:51,400 --> 00:58:54,000
Speaker 1: In fact, I'm usually in the most right room possible.

1063
00:58:54,040 --> 00:58:56,560
Speaker 1: So I think it be harder to answer that question

1064
00:58:56,560 --> 00:58:58,760
Speaker 1: as who who's not been a mentor at this point

1065
00:58:59,040 --> 00:59:01,520
Speaker 1: because I have so many mentors. I mean, how many

1066
00:59:01,560 --> 00:59:04,240
Speaker 1: times have I called you and asked questions? Right? What

1067
00:59:04,240 --> 00:59:07,360
Speaker 1: should I do about this? UM? All my you know

1068
00:59:07,520 --> 00:59:11,360
Speaker 1: E T F brethren who have their own products, right,

1069
00:59:11,400 --> 00:59:14,240
Speaker 1: I talked to them, I asked them questions all the time.

1070
00:59:14,840 --> 00:59:19,440
Speaker 1: UM West is a current mentor early on UM, you know,

1071
00:59:19,680 --> 00:59:22,800
Speaker 1: looking at people like Rob who pioneered non cap weighted

1072
00:59:22,800 --> 00:59:29,120
Speaker 1: indexing UM or not and you know before that when

1073
00:59:29,120 --> 00:59:32,760
Speaker 1: I was a fidelity, my fellow advisors and my clients, right,

1074
00:59:32,840 --> 00:59:34,960
Speaker 1: so my clients, I learned so much from them. I

1075
00:59:35,040 --> 00:59:38,120
Speaker 1: usually now don't get to meet with end clients very much.

1076
00:59:38,440 --> 00:59:41,040
Speaker 1: I usually talked to only advisors. You asked earlier who

1077
00:59:41,080 --> 00:59:43,080
Speaker 1: most of our investors are, and I didn't fully answer

1078
00:59:43,160 --> 00:59:47,600
Speaker 1: that it's advisors. And um, you know I recently got

1079
00:59:47,640 --> 00:59:52,440
Speaker 1: to meet face to face family office and that was

1080
00:59:52,640 --> 00:59:58,080
Speaker 1: a fascinating experience. And just these people were so um

1081
00:59:58,200 --> 01:00:01,360
Speaker 1: kind and generous with their time and um, you know,

1082
01:00:01,440 --> 01:00:06,280
Speaker 1: learning about the strategy and you know, um and you know,

1083
01:00:06,680 --> 01:00:09,320
Speaker 1: sharing with me about their family and and you know,

1084
01:00:09,360 --> 01:00:12,240
Speaker 1: I get my inspiration from these people. These are the

1085
01:00:12,280 --> 01:00:16,960
Speaker 1: people that we created the strategy for. And um, you know,

1086
01:00:17,040 --> 01:00:19,440
Speaker 1: these are the people that whose feedback I listened to, right,

1087
01:00:19,640 --> 01:00:21,280
Speaker 1: people who tell me this is what we want to

1088
01:00:21,320 --> 01:00:26,480
Speaker 1: see next? Or um, when advisors tell me, oh my gosh,

1089
01:00:26,520 --> 01:00:31,120
Speaker 1: you should hear. How are you know our clients respond

1090
01:00:31,240 --> 01:00:34,400
Speaker 1: when we the joy and the relief from our clients

1091
01:00:34,400 --> 01:00:36,920
Speaker 1: when we tell them how we invested for them after

1092
01:00:37,120 --> 01:00:39,880
Speaker 1: the Russia invasion, that we had them in this freedom

1093
01:00:39,880 --> 01:00:44,800
Speaker 1: weighted product. Um, those types of comments are or why

1094
01:00:44,840 --> 01:00:49,920
Speaker 1: I'm in this and and they inspire me. M really interesting.

1095
01:00:50,360 --> 01:00:52,680
Speaker 1: Let's talk about books. What are some of your favorites

1096
01:00:52,720 --> 01:00:55,560
Speaker 1: and what are you reading right now? So right now

1097
01:00:55,640 --> 01:01:02,520
Speaker 1: I'm actually reading, um, the book about Bogel. The book. Um,

1098
01:01:02,520 --> 01:01:04,560
Speaker 1: it's about three quarters of the way through that. How

1099
01:01:04,640 --> 01:01:07,200
Speaker 1: you enjoying it? I'm enjoying it very much. I'm probably

1100
01:01:07,640 --> 01:01:12,360
Speaker 1: on chapter three. Um. I was. I was aghast reading it,

1101
01:01:12,480 --> 01:01:14,840
Speaker 1: and I'm reading this quote and I'm nodding my head

1102
01:01:14,880 --> 01:01:17,920
Speaker 1: in agreement with it. And then I realized, oh, I know,

1103
01:01:18,000 --> 01:01:20,600
Speaker 1: I am in agreement with that because it's you. It

1104
01:01:20,760 --> 01:01:23,160
Speaker 1: was it was pretty like, oh my god, talk about

1105
01:01:23,200 --> 01:01:27,440
Speaker 1: confirmation bias was embarrassing. No, I love how he puts

1106
01:01:27,440 --> 01:01:29,360
Speaker 1: so many of our friends in there, and just like

1107
01:01:29,440 --> 01:01:32,920
Speaker 1: so many quotes. Um, it's like reading a book with

1108
01:01:32,960 --> 01:01:35,640
Speaker 1: all of your friends quotes in there. So I love that. Um,

1109
01:01:35,640 --> 01:01:39,080
Speaker 1: it's so good so far. And he and he said,

1110
01:01:39,160 --> 01:01:41,040
Speaker 1: you know you should read this book because you know

1111
01:01:41,320 --> 01:01:44,600
Speaker 1: you will be inspired by how Jack Bogel also went

1112
01:01:44,640 --> 01:01:47,680
Speaker 1: against the grain and so um, so I love it

1113
01:01:47,720 --> 01:01:50,200
Speaker 1: so far. UM. The other book that you know, I'm

1114
01:01:50,240 --> 01:01:52,280
Speaker 1: a big fan of Bill Browder and what he's doing

1115
01:01:52,320 --> 01:01:55,760
Speaker 1: also Red Notice, and you've read Red Notice. What's the

1116
01:01:55,840 --> 01:01:58,240
Speaker 1: I read the first one, what's the second notice? Second one?

1117
01:01:58,400 --> 01:02:00,439
Speaker 1: Freezing Order? All right, I just got that. I haven't

1118
01:02:00,480 --> 01:02:03,240
Speaker 1: read it yet. That's my next one. Yeah you so,

1119
01:02:03,480 --> 01:02:06,080
Speaker 1: um so that's that's gonna be exciting. I think, Um,

1120
01:02:06,120 --> 01:02:08,120
Speaker 1: I heard that has a happy ending and I love

1121
01:02:08,160 --> 01:02:10,640
Speaker 1: happy endings, and you don't. You don't think of these

1122
01:02:10,640 --> 01:02:13,360
Speaker 1: stories as ones that would have happy endings. But I'm

1123
01:02:13,400 --> 01:02:17,600
Speaker 1: looking forward to seeing what that is. Red Notice is astonishing.

1124
01:02:17,880 --> 01:02:20,400
Speaker 1: I mean, you read it and like, if that was fiction,

1125
01:02:20,440 --> 01:02:23,440
Speaker 1: it wouldn't be believable, right, Like it has to be

1126
01:02:23,520 --> 01:02:26,439
Speaker 1: nonfiction because if it was a novel, you would say,

1127
01:02:26,480 --> 01:02:29,120
Speaker 1: this is the most ridiculous thing I've ever read. But

1128
01:02:29,200 --> 01:02:31,360
Speaker 1: when you know what it actually happened, you're like, holy,

1129
01:02:31,680 --> 01:02:35,480
Speaker 1: it's really astonishing. So you mentioned Eric Beltunist. We have

1130
01:02:35,600 --> 01:02:38,160
Speaker 1: him coming on the show in a few months, and

1131
01:02:38,400 --> 01:02:41,280
Speaker 1: um Bill Browder coming on the show, and really, yeah,

1132
01:02:41,360 --> 01:02:43,480
Speaker 1: so we've we have that's amazing. We have both of

1133
01:02:43,560 --> 01:02:47,760
Speaker 1: your books tied up for uh. For I love having

1134
01:02:47,800 --> 01:02:50,760
Speaker 1: authors over the summer. It's a perfect time. It gives

1135
01:02:50,760 --> 01:02:52,760
Speaker 1: me an opportunity to sit on the beach, read a book,

1136
01:02:53,120 --> 01:02:55,400
Speaker 1: and I have I get to pretend I'm working. What'd

1137
01:02:55,400 --> 01:02:57,800
Speaker 1: you do? I worked all day Sunday? Really, what you do?

1138
01:02:57,960 --> 01:03:02,360
Speaker 1: I I sat on the beach and read Vogel Effects

1139
01:03:02,840 --> 01:03:06,240
Speaker 1: and and that's my aska asked Bill Browder, how he

1140
01:03:06,480 --> 01:03:09,400
Speaker 1: um thinks about emerging markets investing? And he doesn't he

1141
01:03:09,640 --> 01:03:11,439
Speaker 1: tell you he doesn't do it because of the lack

1142
01:03:11,480 --> 01:03:15,000
Speaker 1: of rule of law. Yeah, that makes perfect sense to me. Um,

1143
01:03:15,040 --> 01:03:16,800
Speaker 1: So I obviously disagree with that. You should still do it,

1144
01:03:16,800 --> 01:03:19,840
Speaker 1: because there are some very free markets in emerging markets,

1145
01:03:19,880 --> 01:03:23,400
Speaker 1: but I agree with his reasoning. So so. My wife's

1146
01:03:23,400 --> 01:03:27,280
Speaker 1: brother used to be general counsel of Amaco, like twenty

1147
01:03:27,360 --> 01:03:30,440
Speaker 1: years ago, that little Amaco BP deal. That was his thing.

1148
01:03:31,000 --> 01:03:34,280
Speaker 1: And he was never a fan of investing in Russia

1149
01:03:34,760 --> 01:03:40,160
Speaker 1: because he always described them. Um. He always described them

1150
01:03:40,160 --> 01:03:43,400
Speaker 1: as a criminal enterprise with a standing army attached to it.

1151
01:03:44,000 --> 01:03:48,520
Speaker 1: And that was twenty five years ago. And he turned

1152
01:03:48,520 --> 01:03:51,080
Speaker 1: out to be very very right. He said, every time

1153
01:03:51,280 --> 01:03:54,040
Speaker 1: he ever went to Russia to do any sort of

1154
01:03:54,080 --> 01:03:57,680
Speaker 1: contract ordeal, the terms always changed. Even if you had

1155
01:03:57,680 --> 01:04:00,520
Speaker 1: a sign agreement, it didn't matter. There was no respect

1156
01:04:00,520 --> 01:04:05,520
Speaker 1: for contracts. Forget private property, your individual rights, just whatever

1157
01:04:05,560 --> 01:04:07,200
Speaker 1: they could get away with, they could get away with,

1158
01:04:07,400 --> 01:04:11,680
Speaker 1: and not a surprise, A didn't make it onto your list.

1159
01:04:12,160 --> 01:04:14,520
Speaker 1: Know that rule of law is so important. And Russia

1160
01:04:14,640 --> 01:04:16,440
Speaker 1: is one of those countries. I had a client when

1161
01:04:16,480 --> 01:04:18,520
Speaker 1: I was a fidelity, a Russian client who told me

1162
01:04:18,600 --> 01:04:20,840
Speaker 1: I don't want to invest in Russia because it's like

1163
01:04:20,920 --> 01:04:24,320
Speaker 1: funding terrorism. And you see how prescient that was now.

1164
01:04:24,720 --> 01:04:28,200
Speaker 1: But Russia is one of those countries that has both

1165
01:04:28,320 --> 01:04:32,560
Speaker 1: poor personal freedom and poor economic freedom. So you know,

1166
01:04:32,640 --> 01:04:35,760
Speaker 1: personal freedom I categorized into civil and political freedom. Civil

1167
01:04:35,800 --> 01:04:40,840
Speaker 1: freedoms are things like terrorism, trafficking, torture, disappearances, UM. Women's

1168
01:04:40,880 --> 01:04:44,720
Speaker 1: freedoms there's five women's freedom's proxies and then UM in

1169
01:04:45,080 --> 01:04:48,120
Speaker 1: and these are emerging markets. Women's freedoms like women's rights

1170
01:04:48,120 --> 01:04:52,240
Speaker 1: to movement, women's rights to children after divorce, women's rights

1171
01:04:52,240 --> 01:04:54,760
Speaker 1: to inheritance, things like that UM. And then you have

1172
01:04:54,800 --> 01:04:58,080
Speaker 1: your political freedoms like do process, role of law, UM,

1173
01:04:58,160 --> 01:05:01,400
Speaker 1: civil sure, criminal procedure. And then you have you know,

1174
01:05:01,520 --> 01:05:04,400
Speaker 1: freedom of speech, media expression, and so forth. And then

1175
01:05:04,400 --> 01:05:07,160
Speaker 1: you have your economic freedoms that were all familiar with UH,

1176
01:05:07,280 --> 01:05:10,439
Speaker 1: freedom to trade internationally, sound money right, free to fear

1177
01:05:10,440 --> 01:05:14,440
Speaker 1: countries actually have more sound monetary policies and lower inflation

1178
01:05:14,520 --> 01:05:18,520
Speaker 1: rates historically looking at inflation as a major risk going forward. Um,

1179
01:05:18,640 --> 01:05:24,440
Speaker 1: business regulations, taxation, um, government interference and private markets and

1180
01:05:24,480 --> 01:05:27,919
Speaker 1: so forth. So Russia is one of those countries that rules,

1181
01:05:28,000 --> 01:05:34,320
Speaker 1: you know, ranks poorly on and economy. Yeah, so um

1182
01:05:34,360 --> 01:05:37,520
Speaker 1: those you know, China is another similar situation. So yeah,

1183
01:05:37,600 --> 01:05:41,240
Speaker 1: that's the country that we were never had in the index.

1184
01:05:41,520 --> 01:05:44,160
Speaker 1: All right, And our final two questions, what sort of

1185
01:05:44,200 --> 01:05:46,960
Speaker 1: advice would you give to a recent college grad who

1186
01:05:47,000 --> 01:05:51,680
Speaker 1: was interested in a career in either ETFs, investing or

1187
01:05:52,200 --> 01:05:57,320
Speaker 1: emerging markets. Yeah, so I think a lot of college

1188
01:05:57,360 --> 01:06:01,520
Speaker 1: grads um these days try to go into quant and

1189
01:06:01,880 --> 01:06:04,280
Speaker 1: I think quant does have its place, But I think

1190
01:06:04,400 --> 01:06:08,240
Speaker 1: right now, for for new grads, I would say, look

1191
01:06:08,280 --> 01:06:10,400
Speaker 1: at you know, look around you, and you know, just

1192
01:06:10,560 --> 01:06:14,000
Speaker 1: look at what's happening in the world and invests according

1193
01:06:14,040 --> 01:06:17,600
Speaker 1: to that, right, Um, And sometimes that can work just

1194
01:06:17,680 --> 01:06:21,840
Speaker 1: as well, um, But for everyone, I would say, one,

1195
01:06:23,320 --> 01:06:26,720
Speaker 1: start at a big firm like Fidelity or you know,

1196
01:06:26,720 --> 01:06:28,919
Speaker 1: a company like Bloomberg where you can learn a lot

1197
01:06:29,800 --> 01:06:32,439
Speaker 1: um and they have the resources to train you. Because

1198
01:06:32,480 --> 01:06:34,240
Speaker 1: We've had a lot of college grads come to us

1199
01:06:34,240 --> 01:06:36,320
Speaker 1: and say, can we work for you? And you know,

1200
01:06:36,400 --> 01:06:38,920
Speaker 1: my answer that I do not have the resources to

1201
01:06:39,000 --> 01:06:43,000
Speaker 1: train someone just straight out of college UM as a

1202
01:06:43,040 --> 01:06:46,760
Speaker 1: startup right, So UM, I would much rather hire them

1203
01:06:46,800 --> 01:06:50,160
Speaker 1: after they've got that training. And you know, don't stay forever.

1204
01:06:50,560 --> 01:06:53,440
Speaker 1: Do what you're passionate about. But you know, get the

1205
01:06:53,520 --> 01:06:57,000
Speaker 1: basic training down and these are such great training grounds,

1206
01:06:57,000 --> 01:06:58,880
Speaker 1: and yeah, maybe you'll stay for a long time. I

1207
01:06:58,880 --> 01:07:01,240
Speaker 1: stayed for ten years, Fidel and I loved it, UM

1208
01:07:01,280 --> 01:07:05,160
Speaker 1: and that was a tremendous building, you know, blog and

1209
01:07:05,200 --> 01:07:07,720
Speaker 1: foundation for what I do now. UM. And the second

1210
01:07:07,760 --> 01:07:10,960
Speaker 1: thing I would say is once you do branch out, UM,

1211
01:07:11,000 --> 01:07:13,360
Speaker 1: if you're lucky enough to have a vision or a

1212
01:07:13,400 --> 01:07:16,960
Speaker 1: mission or something that you're passionate about, you know, UM,

1213
01:07:17,760 --> 01:07:20,400
Speaker 1: go for it and try to fail as big as possible.

1214
01:07:20,840 --> 01:07:24,440
Speaker 1: Phil fail early and young recover, yes, And so when

1215
01:07:24,480 --> 01:07:26,360
Speaker 1: you're young, you know, do do what you want. Go

1216
01:07:26,440 --> 01:07:28,439
Speaker 1: for it, and don't ask yourself what is the most

1217
01:07:28,600 --> 01:07:31,480
Speaker 1: stable career path. I think a lot of people ask

1218
01:07:31,560 --> 01:07:34,640
Speaker 1: that these days, but UM, but ask yourself, what is

1219
01:07:34,680 --> 01:07:37,320
Speaker 1: my ideal scenario? What do I want? Ideally? If I

1220
01:07:37,360 --> 01:07:40,200
Speaker 1: could have anything, do anything I want. What would I do?

1221
01:07:40,480 --> 01:07:44,439
Speaker 1: And then go that direction because you may fail, but

1222
01:07:44,520 --> 01:07:47,000
Speaker 1: you know you'll be happy. That's the one thing I

1223
01:07:47,360 --> 01:07:50,240
Speaker 1: learned from Yen v Neck of Van Neck Funds. Actually

1224
01:07:50,280 --> 01:07:52,640
Speaker 1: early on I heard him speak and and somebody asked him,

1225
01:07:52,720 --> 01:07:54,040
Speaker 1: I have an idea for an ET, I should I

1226
01:07:54,080 --> 01:07:56,280
Speaker 1: launch it? And He's like, yeah, yeah, sure, you know

1227
01:07:56,600 --> 01:07:59,320
Speaker 1: you make you might fail, but you'll be happy and

1228
01:07:59,360 --> 01:08:02,320
Speaker 1: that I can tested that. So and you know, one

1229
01:08:02,320 --> 01:08:05,880
Speaker 1: of the things that's fascinating about both Silicon Valley and

1230
01:08:05,920 --> 01:08:11,320
Speaker 1: the United States compared with more traditional countries is failure

1231
01:08:11,560 --> 01:08:15,520
Speaker 1: isn't a red mark in the US the way it

1232
01:08:15,600 --> 01:08:19,800
Speaker 1: is elsewhere. Oh he launched the company and failed, how terrible. Here.

1233
01:08:19,800 --> 01:08:23,639
Speaker 1: You know, vcs and entrepreneurs list their failures. It's almost

1234
01:08:23,640 --> 01:08:25,880
Speaker 1: a badge of an honor. I mean, I know that

1235
01:08:25,880 --> 01:08:28,880
Speaker 1: that that's a given for folks like us, but a

1236
01:08:28,960 --> 01:08:31,920
Speaker 1: lot of people don't understand how significant that is. Yeah.

1237
01:08:31,960 --> 01:08:33,760
Speaker 1: I mean, if you're not failing, you're not trying enough,

1238
01:08:33,800 --> 01:08:35,720
Speaker 1: so you're not reaching out of your comfort zone, you're

1239
01:08:35,720 --> 01:08:39,000
Speaker 1: not taking rich whole self out there. Yeah. Absolutely. And

1240
01:08:39,040 --> 01:08:41,800
Speaker 1: our final question, what do you know about the world

1241
01:08:41,880 --> 01:08:44,720
Speaker 1: of investing today. You wish you knew twenty years or

1242
01:08:44,720 --> 01:08:48,120
Speaker 1: so ago when you were first getting started. Yeah, So

1243
01:08:48,200 --> 01:08:50,400
Speaker 1: when I was first getting started, like twenty years ago.

1244
01:08:50,479 --> 01:08:52,280
Speaker 1: It was twenty years ago, actually, I think it is

1245
01:08:52,320 --> 01:08:54,720
Speaker 1: when I went to art school in Pasadena to go

1246
01:08:54,760 --> 01:08:57,519
Speaker 1: into advertising design. So I was wanting to go into

1247
01:08:57,560 --> 01:08:59,880
Speaker 1: a creative field. And what I didn't realize that that

1248
01:09:00,040 --> 01:09:04,400
Speaker 1: time is that finance can be very creative and for me,

1249
01:09:04,640 --> 01:09:08,559
Speaker 1: indexing is a form of expression. We created this for

1250
01:09:08,680 --> 01:09:13,080
Speaker 1: people who believe in the benefits of freedom and want

1251
01:09:13,160 --> 01:09:16,400
Speaker 1: to express that in their emerging markets allocations. Before there

1252
01:09:16,439 --> 01:09:18,800
Speaker 1: wasn't any way for people to express that if that's

1253
01:09:18,800 --> 01:09:20,920
Speaker 1: what they wanted, and now there is. So we're creating

1254
01:09:20,960 --> 01:09:25,280
Speaker 1: an avenue for people to express their preferences in the

1255
01:09:25,320 --> 01:09:28,960
Speaker 1: emerging market space. Um. And that that's a that's a

1256
01:09:29,040 --> 01:09:33,639
Speaker 1: creative thing, you know, using data that's not readily available

1257
01:09:33,680 --> 01:09:38,920
Speaker 1: on Bloomberg or fact set insteady using freedom as a metric. Um.

1258
01:09:38,960 --> 01:09:41,800
Speaker 1: It was a creative kind of outlet for me. And

1259
01:09:41,840 --> 01:09:46,000
Speaker 1: so this is uh, something I didn't know before that

1260
01:09:46,120 --> 01:09:50,360
Speaker 1: finance and you know, indexing specifically could be a creative exercise.

1261
01:09:50,560 --> 01:09:54,120
Speaker 1: Really quite fascinating. Thank you, Perth for being so generous

1262
01:09:54,120 --> 01:09:57,519
Speaker 1: with your time. We have been speaking with Perth Toll.

1263
01:09:57,880 --> 01:10:00,680
Speaker 1: She is the founder of the Free Itom E t

1264
01:10:00,880 --> 01:10:05,400
Speaker 1: F and Liberty and Freedom Indexes. If you enjoy this conversation,

1265
01:10:05,560 --> 01:10:08,559
Speaker 1: well please check any of the previous four hundred such

1266
01:10:08,600 --> 01:10:11,840
Speaker 1: discussions that we've done over the past eight years. You

1267
01:10:11,880 --> 01:10:15,519
Speaker 1: can find those at iTunes or Spotify or wherever you

1268
01:10:15,560 --> 01:10:18,880
Speaker 1: find your favorite podcasts. We love your comments, feedback and

1269
01:10:18,960 --> 01:10:23,480
Speaker 1: suggestions right to us at m IB podcast at Bloomberg

1270
01:10:23,520 --> 01:10:26,479
Speaker 1: dot net. Sign up from my daily reads at Rid

1271
01:10:26,560 --> 01:10:29,439
Speaker 1: Halts dot com. Follow me on Twitter at Rid Halts.

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01:10:29,560 --> 01:10:31,280
Speaker 1: I would be remiss if I did not thank the

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Speaker 1: Cracks staff who helps us put these conversations together each week.

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01:10:35,280 --> 01:10:38,680
Speaker 1: Justin Miller is my engineer, Paris Wald is my producer.

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Speaker 1: Sean Russo is my head of research. Attica val Bron

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Speaker 1: is our project manager. I'm Barry Rishults. You've been listening

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Speaker 1: to Masters in Business on Bloomberg Radio.