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Speaker 1: Brought to you by Bank of America. Merrill Lynch, committed

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Speaker 1: to bringing higher finance to lower carbon named the most

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Speaker 1: innovative investment bank for climate change and sustainability by the Banker.

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Speaker 1: That's the power of global connections. Bank of America, North

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Speaker 1: America Remember f D I C. This is Masters in

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Speaker 1: Business with Barry Ridholds on Bloomberg Radio. This week on

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Speaker 1: the podcast, we have Morgan Stanley's global equity strategist, Rusher Sharma.

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Speaker 1: He is also the head of Emerging Markets for Morgan Stanley.

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Speaker 1: A person who may not be well known to the

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Speaker 1: investing public, but is very influential on Wall Street. Frequently

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Speaker 1: writes for for for outlets like The New York Times,

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Speaker 1: The Wall Street Journal, UH, the FT, describing what's happening

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Speaker 1: UH in the world and in the global economy. His

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Speaker 1: most recent book is called The Rise and Fall of Nations.

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Speaker 1: His previous book was on Breakout Nations and if you

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Speaker 1: are at all interested investing overseas, he has some very

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Speaker 1: very specific ideas about what you should and shouldn't do.

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Speaker 1: And I don't mean by Brazil, sell Russia or anything

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Speaker 1: like that. It's really his process that's so good. He

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Speaker 1: the most recent book, The Rising Full Nations. It's a

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Speaker 1: ten point treatise on these are the ten steps you

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Speaker 1: should make before reaching a decision about buying or selling

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Speaker 1: any particular region in the world. UH. He's very rigorous

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Speaker 1: and analytical, and his thought process is different than from

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Speaker 1: from what all too many people I think UH do

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Speaker 1: when they approach emerging markets. I found it to be

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Speaker 1: a fascinating conversation and I think you will as well.

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Speaker 1: With no further ado, my conversation with Rucier Sharma. This

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Speaker 1: is Master's in Business with Barry Ridholts on Bloomberg Radio.

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Speaker 1: My special guest today is Ruscier Sharma. He is Morgan

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Speaker 1: Stanley's chief Global strategist and head of Emerging Markets. He

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Speaker 1: has quite the fascinating background. UH. He manages about twenty

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Speaker 1: billion dollars with a team of twenty five people. He

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Speaker 1: is a frequent contributor to The Wall Street Journal, Financial Times,

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Speaker 1: Foreign Affairs. Raised in Delhi, the son of a military officer,

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Speaker 1: and had written for India's largest financial daily, UH, the

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Speaker 1: Economic Times since the age of seventeen. Rusher is also

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Speaker 1: the author of several books, including Breakout Nations, a two

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Speaker 1: thousand and twelve best seller, and more recently The Rise

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Speaker 1: and Full of Nations, uh New York Times bestseller that

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Speaker 1: just came out this year. Ruscier Charma, welcome to Bloomberg

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Speaker 1: to be your Mary. Thanks. So I have so much

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Speaker 1: stuff to go over with you. I'm I'm fascinated by

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Speaker 1: your background and and your travel history. How did you

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Speaker 1: develop a love for international travel? Yeah, you know, like

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Speaker 1: I've had a nomadic existence, I um. I was born

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Speaker 1: in the south of India, and then because my father,

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Speaker 1: as you mentioned at the outset, was in the services.

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Speaker 1: He was a naval officer and also spent some time

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Speaker 1: as a diplomat in overseas locations like Singapore. So that's

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Speaker 1: why I had a nomadic existence, traveling from one place

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Speaker 1: to another. I think that may have some way seated

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Speaker 1: this interest in global affairs at a young age. So

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Speaker 1: before you started at Morgan Stanley in six how many

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Speaker 1: countries have you lived in or at least visited prior?

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Speaker 1: I had lived in for a large part of my

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Speaker 1: life in India and then also in Singapore. And although

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Speaker 1: I had visited other places, I um, you know, like

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Speaker 1: apart from Europe and being to London, et cetera. But

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Speaker 1: I'd say that it was my education in Singapore. I

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Speaker 1: went to a school they called the United World College,

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Speaker 1: and uh, at a very young age, they sort of

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Speaker 1: paid a lot of attention because it was an international school.

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Speaker 1: They paid a lot of attain to sort of uh

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Speaker 1: showing you about exactly like about global affairs and and

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Speaker 1: it's also like these are things which are so hard

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Speaker 1: to know when or water or y. But at a

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Speaker 1: someone like at a very young age, I was always

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Speaker 1: very interested in current interfairs, whether it was Indian current

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Speaker 1: affairs or global current interfairs. And I think that that's

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Speaker 1: what really sort of uh set me in motion here.

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Speaker 1: So so let's talk about your job at Morgan Stanley.

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Speaker 1: You're you're their global chief strategist as well as head

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Speaker 1: of Emerging Markets. What do those jobs and tell? But

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Speaker 1: I'm basically like an investor, So the investment management side

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Speaker 1: I spend. I've always been on the investing side, and

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Speaker 1: uh so, um, I run money or managed money. So

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Speaker 1: is that is that number of ballpark twenty billion dollars? Yes,

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Speaker 1: that's right, just over twenty billion dollars in sort of

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Speaker 1: assets under management and also sort of think about global

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Speaker 1: macro issues for the firm, and so that's what sort

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Speaker 1: of gives me my other title as being the chief

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Speaker 1: Global Strategist. So how much of that money is dedicated

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Speaker 1: to e M and how such of it is? Well,

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Speaker 1: the money I directly manage is mostly dedicated to e M. Yeah, um,

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Speaker 1: we also have some uh some global money which we manage,

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Speaker 1: but mostly it is money that I manage. But in

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Speaker 1: terms of the chief Global Strategies footprint really involves thinking

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Speaker 1: a lot about the major global issues and interacting with

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Speaker 1: clients and telling them about that. So there's no substitute

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Speaker 1: for for boots on the ground and seeing contributely. Yes,

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Speaker 1: how often are you on the road? How many countries

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Speaker 1: do you go to a year? And what parts of

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Speaker 1: the world have you been to recently? Yeah, I try

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Speaker 1: an average, I'd say about one country a month, which is,

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Speaker 1: you know, basically pick a country and spend nearly a

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Speaker 1: week there or at least a few days there. If

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Speaker 1: it's a small country, then maybe just go to the region.

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Speaker 1: So that's what I've done for the last twenty years. Really, Yeah,

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Speaker 1: because I find that there are two things here, you know,

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Speaker 1: which are sort of very important out here. One is

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Speaker 1: the fact that when you're on the ground, it focuses

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Speaker 1: your mind like never before. Like I consider in my

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Speaker 1: face and I can read all I want about Philippines,

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Speaker 1: and I just will not get that involved with the

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Speaker 1: Philippines until I go to the Philippines. And then when

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Speaker 1: you are there, you're basically sort of you know, covering it, uh,

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Speaker 1: top down to bottom up in terms of your meeting

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Speaker 1: the policymakers, meeting government people, central bank people, You're meeting

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Speaker 1: CEOs of companies, and then also meeting investors and you know,

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Speaker 1: sort of other players in the marketplace. So I find

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Speaker 1: that really fascinating, that one that it focuses your mind

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Speaker 1: when you're on the ground, and to that you end

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Speaker 1: up always picking up little details about that country which

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Speaker 1: you wouldn't have if you were just doing an office

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Speaker 1: in a dry research report. That's I'm doing the math

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Speaker 1: in my head, one country a month for twenty years.

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Speaker 1: How many countries have you been? I assume there are

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Speaker 1: a few repeats, you know there are are there even

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Speaker 1: two hundred forty countries? Aren't well, roughly that much. I

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Speaker 1: think the UN councils over two hundred countries, So you know,

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Speaker 1: like I counted the other day. Uh, and I've been

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Speaker 1: to just over sixty countries. That's pretty good, that's pretty

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Speaker 1: but you know, like that's amazing that I think that

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Speaker 1: I've traveled so much, but I haven't that only been

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Speaker 1: to sixty countries out of whatever two d odd countries

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Speaker 1: that you can possibly go. Tom having said that, of

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Speaker 1: a few key countries that I do visit repeated, like China, India,

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Speaker 1: those are the kind of places where I've been to

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Speaker 1: virtually every year. So this year, when you go overseas

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Speaker 1: and you visit people, what do they want to talk

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Speaker 1: about besides the US elections? Well, I mean that's really

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Speaker 1: top of mind. I mean, there's never been dominating every absolutely,

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Speaker 1: there's never been so much interest in the US elections

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Speaker 1: or in US politics as has been the case this year.

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Speaker 1: And you know, like yeah, even after the election was over,

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Speaker 1: even now, people are still sort of dissecting it in

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Speaker 1: a way that the you know, because I think that

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Speaker 1: that's a that's the big difference that had someone like

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Speaker 1: Hillary won the election, then I think that what would

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Speaker 1: have happened was that in terms of that, I don't

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Speaker 1: think the interests would have been that high. So whether

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Speaker 1: we like Trump or not. The one thing which is

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Speaker 1: great for I think is ratings and keeping the interest

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Speaker 1: very high in US politics, no doubt about that. So

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Speaker 1: given their interest in the U S election and given

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Speaker 1: what Trump has said about um trade policies, what sort

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Speaker 1: of reaction have you been hearing since the election from

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Speaker 1: contacts overseas well? I think that, you know, there's a

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Speaker 1: big fair factor just now because I think that in

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Speaker 1: the emerging markets there's been a huge sort of shift

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Speaker 1: in sentiment, which is that there was a sense before

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Speaker 1: the election that you know, there's some sort of recovery

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Speaker 1: as we under underwe in emerging markets. But after the

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Speaker 1: election there's been a dramatic shift in mood because now

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Speaker 1: all of a sudden, people are wondering that does this

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Speaker 1: mean that the US is going to turn much more inward,

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Speaker 1: more protectionist and the one place where sentiment is totally

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Speaker 1: beaten down to fight that's my next top all, So

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Speaker 1: I'm gonna go. That's my next country I'm gonna visit

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Speaker 1: is Mexico. Has to be. Yeah, I'm Barry Ritolts. You're

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Speaker 1: listening to Masters in Business on Bloomberg Radio. My special

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Speaker 1: guest today is rusci Or Sharma. He is Morgan Stanley's

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Speaker 1: Chief Global strategist and a world traveler. Most recently, he

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Speaker 1: is the author of The Rise and Fall of Nations,

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Speaker 1: Forces of Change in the Post Crisis World. Let's talk

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Speaker 1: a little bit about the four d s you write

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Speaker 1: about in the book depopulation, deglobalization, de leveraging and d democratization.

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Speaker 1: I bet when you wrote it you weren't trying to

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Speaker 1: be ironic. But here we are, and and each of

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Speaker 1: these things are now much more intense subjects than they

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Speaker 1: were just a few weeks ago. So let's start with depopulation.

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Speaker 1: First of all, what is depopulation and how does population

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Speaker 1: impact various countries? Yeah, look, you know, in terms of

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Speaker 1: there's means uh so much handwringing over the last few

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Speaker 1: years about why economic growth is so low across the world,

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Speaker 1: and this is not just a US phenomena. It's across

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Speaker 1: the world. In fact, there is no region in the

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Speaker 1: world today which is growing at the pace it was

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Speaker 1: before the global financial crisis of two thousand and eight.

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Speaker 1: And one of the most underappreciated factors for this low

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Speaker 1: economic growth environment is the change in demographics across the world,

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Speaker 1: not just in the Western world as popularly believed, but

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Speaker 1: also in large parts of the emerging world China, Korea,

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Speaker 1: Taiwan and Russia, really because because the assumption has been

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Speaker 1: that when you look at the Western world, you know,

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Speaker 1: the Japanese or an aging society with no immigration and

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Speaker 1: a limited number of young people. In China, their one

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Speaker 1: child rule really has impacted um their demography. The US

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Speaker 1: seems to be growing faster than Europe, but the assumption

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Speaker 1: is always well, emerging markets in African South America, they

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Speaker 1: have to be populating wildly. Are you saying that's not

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Speaker 1: the case. That's true, but there's been a massive slow

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Speaker 1: down in the growth of population across the world, and

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Speaker 1: of course in places such as Germany or even Russia

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Speaker 1: and all it's turned negative. The working ash population increases,

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Speaker 1: really yes, and in China for the first time it's

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Speaker 1: working ash population in fact fail last year. So these

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Speaker 1: are huge changes which are taking place. But even in

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Speaker 1: the very populous countries which you talk about in Africa

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Speaker 1: and in places like India and Pakistan, the slow down

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Speaker 1: in population growth rate has been quite sharp. Really, Like,

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Speaker 1: as you know, there are two drivers of economic growth,

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Speaker 1: which is one is the increase in labor force, and

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Speaker 1: two is the increase in productivity. Those are the two

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Speaker 1: things which drive economic growth. And when we look back

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Speaker 1: in history, what we're gonna see is this, which is

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Speaker 1: at the period from nineteen fifty till about two thousand

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Speaker 1: and eight was the fastest growing period in the history

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Speaker 1: of economic development, much faster than even the growth rates

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Speaker 1: we saw in the Second Industrial Revolution in the late

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Speaker 1: nineteenth century, when you had a massive movement productivity. And

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Speaker 1: the reason for that was that the world's population and

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Speaker 1: therefore the world's labor force, never grew at such a

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Speaker 1: rapid pace as was the case between nineteen fifty and

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Speaker 1: two thousands and eights. So so let's unpack that a

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Speaker 1: little bit. I'm hearing you saying that there was used

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Speaker 1: post war baby boom. We all know that that was

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Speaker 1: not just the US but global. Yes. Um, you also

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Speaker 1: had a massive uptick in productivity. Yes, at least until

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Speaker 1: let's go at the late nine ten nineties, where there's

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Speaker 1: an argument to be made that there's still an increase

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Speaker 1: in productivity, we're just measuring it all wrong. And then third,

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Speaker 1: we're now at a point where population growth has tailed off,

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Speaker 1: and that's the new normal. That's the reason that the

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Speaker 1: economy being as the single most important reason. As you said,

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Speaker 1: like on productivity, there's still a debate where many people

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Speaker 1: think it's being underestimated, mismeasured and stuff. But on the

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Speaker 1: trends and demographics there can be no debate because those

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Speaker 1: trains there to be seen. And here's the basic train,

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Speaker 1: which is that still the middle of the last decade,

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Speaker 1: the world's working each population was growing at a pace

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Speaker 1: of about two percent. Here since there's been falling off

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Speaker 1: a cliff and today that rate is down to one

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Speaker 1: percent a year. Do you think we're going to flatten

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Speaker 1: out or even go negative? Well, I don't know about

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Speaker 1: being negative, but the peace is set to slow down further.

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Speaker 1: Because that's fascinating because we've my whole life, I've heard

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Speaker 1: these dystopian forecasts that overpopulation ten billion, fifteen billion, twenty billion,

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Speaker 1: what are we gonna do. We may actually reach, just

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Speaker 1: basis and sort of fun a population that we tap

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Speaker 1: out at eight nine billion. And yeah, I mean, the

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Speaker 1: world's population is still set to increase further, but the

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Speaker 1: pace has slowed down dramatically. So that's the important thing,

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Speaker 1: and that's the very important variable for economic growth, which

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Speaker 1: is Now let me ask you why is the population slowing?

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Speaker 1: Because I would have assumed, well, wealthy countries tend to

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Speaker 1: have better healthcare, access to birth control, fewer children. But

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Speaker 1: you're implying this is a global phenomena. Yeah, but I

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Speaker 1: think that it's also because you've had an increase in

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Speaker 1: female participation in the labor force in many countries, and

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Speaker 1: so people are having less babies in in general. So

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Speaker 1: I think that it's also like a lifestyle issue. It's

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Speaker 1: a it's a demographic issue in terms of the mortality

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Speaker 1: rates have dropped everywhere, and so have the fertility rates

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Speaker 1: have dropped even faster. You know, fertility rates drafting faster.

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Speaker 1: What's the driver of that? Well enough example, take India,

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Speaker 1: you know, my homeland, which is that that the real

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Speaker 1: rate they used to be about six or so in

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Speaker 1: the nine sixties, that's down to two and a half.

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Speaker 1: Because you know, there are much more sort of sensitive

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Speaker 1: about families about how many children that they're having. Uh,

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Speaker 1: you know, so that that sort of paces slowed down

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Speaker 1: dramatically back there. I could talk about population all day.

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Speaker 1: Let's move on to the other d's deglobalization. Yeah, given

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Speaker 1: the results of the election. Let's talk a little bit

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Speaker 1: about trade barriers and how important free trade is to

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Speaker 1: the global economy. Yeah, you know, there are three drivers

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Speaker 1: I think of globalization, right, so we think of it

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Speaker 1: mostly in terms of trade. But the other two drivers

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Speaker 1: are capital, right, the free movement of capital between boarders,

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Speaker 1: and the third is doe with immigration, trade, capital and immigrants.

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Speaker 1: So these are the three tenets of traditional globalization. All

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Speaker 1: these three increased massively in the nineteen eighties and nineteen nineties,

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Speaker 1: right up until the financial crisis of two thousand and eight.

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Speaker 1: You've got explosion in all these three. Since two thousand

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Speaker 1: and eight, they've all slowed down dramatically. So cross border

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Speaker 1: capital movements much slower than much slower, absolutely, I mean

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Speaker 1: like those are virtually collapsed. And we know immigration has

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Speaker 1: certainly can hit actually slowed down, and trade and trade

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Speaker 1: has slowed down. That you know, we have we've all

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Speaker 1: been used to a world where trade has increased at

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Speaker 1: a rate which is much much faster than global economic growth.

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Speaker 1: And that's not a one off course I've seen the

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Speaker 1: occasional monthly trade is a little less. No, it's a

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Speaker 1: month you're phenomenon. I'm saying that This is persistent now

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Speaker 1: on a train basis this decade, and if you look

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Speaker 1: at the policies that the governments are taking, I think

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Speaker 1: that these trends will only intensify. And the election, which

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Speaker 1: you pointed out just now in the US is basically

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Speaker 1: another traind an answer. I trade ell actually some degree,

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Speaker 1: I mean, we'll see what actually of TPP and done with.

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Speaker 1: I think a TPP et cetera are dead. I mean,

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Speaker 1: I really don't think that those things after we're going

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Speaker 1: to see a change. And is it realistic to change now?

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Speaker 1: It's gonna be much more difficult. But I think that

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Speaker 1: you know, that is something that we're likely to like

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Speaker 1: to obviously see touched upon. As I said, at this stage,

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Speaker 1: it's very hard to know what all Trump is going

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Speaker 1: to follow through on, in which on what he said

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Speaker 1: in the election, But I think the direction is clear,

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Speaker 1: which is on all these three things. I do not

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Speaker 1: see a major pickup taking place anytime soon. And here

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Speaker 1: at history is very instructive. In fact, I've looked at this,

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Speaker 1: which is that globalization tends to move in waves, which

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Speaker 1: are multi decade waves. We saw a big increase in

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Speaker 1: globalization take place also in the late nineteenth century right

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Speaker 1: up until the first decade of the twentieth century, and

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Speaker 1: then from nineteen fourteen onwards with the outbreak of the

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Speaker 1: First World War, we've got a big decline in globalization

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Speaker 1: which lasted for many decades. So my sort of bet

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Speaker 1: at this point is that the globalization is here to stay.

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Speaker 1: This is the new buzzword and a multi year traind

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Speaker 1: not just uh, you know, like a freak data event.

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Speaker 1: I'm very results. You're listening to Masters in Business on

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Speaker 1: Bloomberg Radio. My special guest today is Russier Sharma. He

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Speaker 1: is Morgan Stanley's chief Global strategist and head of Emerging

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Speaker 1: Markets and manages over twenty billion dollars in assets. He

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Speaker 1: is a frequent contributor to various media outlets and is

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Speaker 1: the author of The Rise and Fall of Nations and

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Speaker 1: Breakout Nation, which was a highly regarded book that came

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Speaker 1: out in So let's talk about that phrase. What is

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Speaker 1: a breakout nation? Right at that point in time when

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Speaker 1: I wrote the book, it was really sort of to

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Speaker 1: bust the myths of the brick countries, which is that

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Speaker 1: there was so much hype about the brick nations last decade. Right,

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Speaker 1: Thank you for that, because it seems like Brick was

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Speaker 1: created because it was an amusing acronym, but really, what

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Speaker 1: is it that ties China? But I think yeah, but

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Speaker 1: I think if to understand the sociology as to why

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Speaker 1: it became so popular, which at that last decade, we

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Speaker 1: saw an unprecedented boom in emerging markets. Virtually every emerging

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Speaker 1: market did well last decade in economic growth terms, equity

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Speaker 1: market performance, financial terms, every emerging market did well. And

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Speaker 1: then Brick captured the four largest emerging markets. That's it.

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Speaker 1: So this was a great marketing acronym, but like all

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Speaker 1: marketing creations, it had a use markets. So so I

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Speaker 1: think that there's there were a flurry of acronyms which

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Speaker 1: came out even after Brick, but they've all failed since

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Speaker 1: and Brick today appears like such a last decade concept.

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Speaker 1: So the book in two thousand and twelve, which I wrote,

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Speaker 1: Breakout Nations, was that, Okay, the Brick era is over.

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Speaker 1: Which are the next countries which are likely to do

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Speaker 1: well across the world. Let's talk about that. What are

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Speaker 1: some of the countries that may not make for a

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Speaker 1: perfect acronym but have a lot of growth potential? Yeah,

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Speaker 1: you know, when I wrote that book. At that point

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Speaker 1: in time, I had pointed out in the emerging world

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Speaker 1: to countries such as Philippines, Indonesia, I had pointed out

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Speaker 1: to some countries in Eastern Europe such as Poland, Czech Romania,

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Speaker 1: and then I'd also sort of pointed out to some

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Speaker 1: so called frontier markets. Now I'm out to find the

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Speaker 1: difference between emerging and frontier. Yeah. I think the difference

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Speaker 1: between emerging in frontier, at least in the investing world,

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Speaker 1: is that emerging markets are seen to be mainstream countries

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Speaker 1: in which you can easily invest and get your money

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Speaker 1: like in and out. Frontier tends to be the next category,

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Speaker 1: which are markets which are slightly off the beaten downpath.

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Speaker 1: Give us a few examples. Yeah, For example, like in

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Speaker 1: the frontier markets today, you would have countries such as Kazakhistan,

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Speaker 1: or you would have Romania. But the largest ones you

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Speaker 1: would have our Nigeria, Vietnam. I was going to ask

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Speaker 1: you about Vietnam. Frontier market, not a emerging market, not

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Speaker 1: as yet. It's a classification issue, right, which is that

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Speaker 1: the difference is not that much, But it's a classification issue.

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Speaker 1: So how do you define that when I think of Vietnam.

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Speaker 1: I think of a country that is rapidly adopting Western

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Speaker 1: technology and and all variations of capitalism, a lot of

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Speaker 1: outsourcing to Vietnam. They're a competitor to China, and they

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Speaker 1: seem to be booming. Yeah. I mean, like Vietnam is

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Speaker 1: a country that I'm optimistic on in my in my

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Speaker 1: latest book, when apply the ten rules, Vietnam does come

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Speaker 1: up fairly well. What about Turkey. Turkey is one of

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Speaker 1: those countries. Turkey the country on which I've changed my mind,

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Speaker 1: which is that Turkey used to be a country which

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Speaker 1: in Breakout Nations I was relatively optimistic on. But I

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Speaker 1: think that from about two thousand and thirteen, when Urduan

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Speaker 1: began to lose the plot, I think that since then

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Speaker 1: I've been much more skeptical on Turkey, and remains skeptical

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Speaker 1: on Turkey today because Turkey is a country which is

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Speaker 1: running massive financial imbalances, one of the largest current account

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Speaker 1: deficits of any emerging market. It has not been able

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Speaker 1: to correct that despite the very sharp fall in commodity prices.

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Speaker 1: And then you have the case of Urduan. I mean,

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Speaker 1: here is a leader who seems to have overstayed his

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Speaker 1: welcome in power. When Urduan first came to power, he

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Speaker 1: was a reformer. He wanted to take Turkey closer to Europe.

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Speaker 1: He implemented lots of reforms to try and meet the

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Speaker 1: requirements towards a move to the European Union. But if

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Speaker 1: you look at how he's governed in the last few years,

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Speaker 1: it's been very different. That his entire focus has been

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Speaker 1: on cementing his hold on par even if that comes

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Speaker 1: at a major economic cost. So let's talk about something

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Speaker 1: related to that. The old line I was familiar with

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Speaker 1: was geography is destiny, right, but your variation of it

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Speaker 1: is look for the geographic sweet spa. So what is

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Speaker 1: the geographic sweet spot and what countries are are in it? Yeah, So,

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Speaker 1: like what I mentioned there is that if you look

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Speaker 1: at the history of economic development, countries, particularly the mid

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Speaker 1: too small countries have done well when they are in

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Speaker 1: the right trade routes. So if you have in some

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Speaker 1: of the world's major trade routes and those countries find

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Speaker 1: themselves in those trade routes, they have done pretty well.

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Speaker 1: So those countries today, Vietnam is a classic case of that.

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Speaker 1: You know, like it's there in the trade routes south

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Speaker 1: of you know, like China, and in terms of how

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Speaker 1: like Vietnam is doing, she Lanka is another example, like

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Speaker 1: strategically very well located. Then you have in the Middle

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Speaker 1: East Dubai, you know, which is sort of done well.

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Speaker 1: So just just the fortuitousness of being, yes, near deep

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Speaker 1: water port, near near trade routes, etcetera. Yes, I think

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Speaker 1: that's something which is a you know, which is a helpful.

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Speaker 1: Now again, there are many countries who can completely waste

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Speaker 1: that dividend that they get from being in the right

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Speaker 1: geography right, so it's a huge help to store wars

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Speaker 1: exactly like it's a huge help to start with, especially

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Speaker 1: for a small to mid size country, and you know,

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Speaker 1: Singapore Hong Kong in the past have shown that. Having

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Speaker 1: said that, I this is one thing which I think

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Speaker 1: I have to adjust to the new reality that in

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Speaker 1: a deglobalizing world, which we just spoke about, I think

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Speaker 1: in that environment to be able to export your way

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Speaker 1: to prosperity is going to be much more difficult. So

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Speaker 1: I think the world is now beginning to change on

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Speaker 1: that that it's no it's no longer that easy to

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Speaker 1: export your way to prosperity and being in the right

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Speaker 1: geographical sweet sport is still helpful, but not as helpful

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Speaker 1: as it used to be when the world was globalizing.

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00:22:24,359 --> 00:22:27,760
Speaker 1: I'm very hults. You're listening to Masters in Business on

430
00:22:27,800 --> 00:22:31,760
Speaker 1: Bloomberg Radio. My special guest today is Ruscier Sharma. He

431
00:22:31,920 --> 00:22:36,480
Speaker 1: is Morgan Stanley's chief Global strategist and head of Emerging Markets.

432
00:22:36,720 --> 00:22:38,880
Speaker 1: Let's talk a little bit about some of those emerging

433
00:22:38,920 --> 00:22:41,800
Speaker 1: markets and and some of the issues that we see

434
00:22:41,880 --> 00:22:44,760
Speaker 1: going on. I've noticed that people have a tendency to

435
00:22:44,960 --> 00:22:49,040
Speaker 1: really over generalize about emerging markets. Are they all that

436
00:22:49,160 --> 00:22:53,480
Speaker 1: similar or are there that many dramatic differences from country

437
00:22:53,480 --> 00:22:56,600
Speaker 1: to country. There are dramatic differences, and over time those

438
00:22:56,600 --> 00:22:59,080
Speaker 1: differences show up. But I think that in the financial

439
00:22:59,080 --> 00:23:02,439
Speaker 1: community it's very easy to club them together, especially in

440
00:23:02,440 --> 00:23:06,000
Speaker 1: a world where passive investing is on the rise, and uh,

441
00:23:06,040 --> 00:23:08,000
Speaker 1: you know, people just want to sort of okay, emerging

442
00:23:08,040 --> 00:23:09,919
Speaker 1: markets are doing well, and they just put something in

443
00:23:09,920 --> 00:23:12,080
Speaker 1: an eat have blindly and and sort of get on

444
00:23:12,200 --> 00:23:14,880
Speaker 1: with it. I think that it's become easy to generalize.

445
00:23:14,920 --> 00:23:17,680
Speaker 1: But yeah, over time, the differences are huge, and the

446
00:23:17,720 --> 00:23:21,080
Speaker 1: performance of countries is very stark. In terms of like

447
00:23:21,119 --> 00:23:24,560
Speaker 1: the differences over time, like this decade, Brazil, Russia have

448
00:23:24,640 --> 00:23:27,080
Speaker 1: performed so poorly. On the other hand, you have countries

449
00:23:27,119 --> 00:23:29,879
Speaker 1: like Philippines or even like in Indonesia, which I've done

450
00:23:29,960 --> 00:23:32,840
Speaker 1: much better, countries like India which are still sort of growing.

451
00:23:33,160 --> 00:23:36,199
Speaker 1: China's economic prospects are changing for the worst very quickly.

452
00:23:36,280 --> 00:23:38,760
Speaker 1: So let's address a few of those countries. So let's

453
00:23:38,800 --> 00:23:41,280
Speaker 1: let's look at the two biggest one you mentioned, Russia

454
00:23:41,320 --> 00:23:44,000
Speaker 1: and China. I've been hearing about Chinese debt now for

455
00:23:44,040 --> 00:23:48,240
Speaker 1: a decade. Jim Chanos famously started planning the table five

456
00:23:48,359 --> 00:23:51,600
Speaker 1: years ago about this. But really this now, more than ever,

457
00:23:51,680 --> 00:23:54,960
Speaker 1: we're seeing China appearing to really have taken on a

458
00:23:55,000 --> 00:23:57,720
Speaker 1: whole lot of debt. How much trouble is China in

459
00:23:58,040 --> 00:24:00,440
Speaker 1: and can they grow their way out of it? Because

460
00:24:00,480 --> 00:24:03,480
Speaker 1: I've dedicated in an entire chapter in my book to

461
00:24:03,960 --> 00:24:05,960
Speaker 1: the issue of debt. I call it the Kiss of debt.

462
00:24:06,280 --> 00:24:08,359
Speaker 1: That in the ten rules that I look at to

463
00:24:08,359 --> 00:24:09,919
Speaker 1: figure out if a country is going to do well

464
00:24:10,000 --> 00:24:12,640
Speaker 1: or not do well in the foreseeable future, the one

465
00:24:12,720 --> 00:24:15,200
Speaker 1: in which I have the maximum confidence in is the

466
00:24:15,280 --> 00:24:17,479
Speaker 1: Kiss of debt rule. Why because we did a lot

467
00:24:17,520 --> 00:24:19,479
Speaker 1: of research on this, that's my team and I and

468
00:24:19,520 --> 00:24:22,480
Speaker 1: what I found out here was that if a country's

469
00:24:22,560 --> 00:24:26,840
Speaker 1: debt increases very sharply over a short time horizon, that

470
00:24:26,880 --> 00:24:29,399
Speaker 1: country always gets into trouble. It's not going to do

471
00:24:29,400 --> 00:24:31,080
Speaker 1: with the level of debt. It's got to do with

472
00:24:31,119 --> 00:24:33,040
Speaker 1: the pace of increase. If you take on too much

473
00:24:33,040 --> 00:24:35,399
Speaker 1: debt over a very short time horizon, you're bound to

474
00:24:35,480 --> 00:24:38,359
Speaker 1: make bad investments that are bound to be bad loans,

475
00:24:38,480 --> 00:24:40,640
Speaker 1: a lot of mal investment in the economy, and that's

476
00:24:40,640 --> 00:24:43,119
Speaker 1: going to come back to haunt that economy and China.

477
00:24:43,520 --> 00:24:46,120
Speaker 1: The dead binge that China has been on this decade

478
00:24:46,280 --> 00:24:49,320
Speaker 1: is unprecedented. So the question about that, and I don't

479
00:24:49,320 --> 00:24:51,240
Speaker 1: know if you can answer this. They seem to be

480
00:24:51,320 --> 00:24:54,320
Speaker 1: making so much money, They built so many factories, they

481
00:24:54,359 --> 00:24:57,399
Speaker 1: were attracting so much economic activity. Why would they have

482
00:24:57,480 --> 00:24:59,600
Speaker 1: to take on all that? Yeah, that's my point, which

483
00:24:59,640 --> 00:25:02,560
Speaker 1: is that instead ambition to grow at a rate which

484
00:25:02,600 --> 00:25:05,720
Speaker 1: is no longer feasible or no longer sustainable. So till

485
00:25:05,720 --> 00:25:08,640
Speaker 1: two thousand and eight, until the global financial crisis, China's

486
00:25:08,680 --> 00:25:12,160
Speaker 1: dead situation was relatively stable. So you know, China's dead

487
00:25:12,240 --> 00:25:14,679
Speaker 1: was increasing, but increasing in line with the you know,

488
00:25:14,720 --> 00:25:17,840
Speaker 1: with the underlying economic growth rate. So it was relatively stable.

489
00:25:18,440 --> 00:25:21,800
Speaker 1: After the global financial crisis, and when things started to

490
00:25:21,800 --> 00:25:25,080
Speaker 1: slow down across the world, you know, like you're a

491
00:25:25,080 --> 00:25:27,880
Speaker 1: major slowdown, their exports got very badly hit. They still

492
00:25:27,920 --> 00:25:30,159
Speaker 1: wanted to grow at a rate which they thought was

493
00:25:30,280 --> 00:25:32,000
Speaker 1: right for them. And this is one of the problems

494
00:25:32,000 --> 00:25:33,959
Speaker 1: that you have in a sort of that kind of

495
00:25:34,280 --> 00:25:36,359
Speaker 1: economic system, which that they come up with a growth

496
00:25:36,480 --> 00:25:39,040
Speaker 1: rate and then just want to achieve that no matter what,

497
00:25:39,280 --> 00:25:43,080
Speaker 1: regardless of what the reality on on the growth pure

498
00:25:43,240 --> 00:25:45,840
Speaker 1: absolutely so I think that that's what China has been doing,

499
00:25:45,840 --> 00:25:47,600
Speaker 1: which is that it wants to keep growing at a

500
00:25:47,640 --> 00:25:50,160
Speaker 1: target it sets, which is, you know, six to seven percent.

501
00:25:50,400 --> 00:25:53,159
Speaker 1: That target is set with only one objective, which is

502
00:25:53,160 --> 00:25:55,320
Speaker 1: in two thousand and ten, they decided we have to

503
00:25:55,400 --> 00:25:58,560
Speaker 1: double our economic size by the end of the decade.

504
00:25:58,720 --> 00:26:01,080
Speaker 1: And so the man that they did were that we

505
00:26:01,119 --> 00:26:03,240
Speaker 1: need a growth of eight percent first and seven and

506
00:26:03,359 --> 00:26:05,840
Speaker 1: six to get there. And so they're following that path,

507
00:26:06,000 --> 00:26:08,560
Speaker 1: but they're taking on debt like never before. There's one

508
00:26:08,640 --> 00:26:11,639
Speaker 1: simple statistic about China which would worry us. At the

509
00:26:11,680 --> 00:26:14,560
Speaker 1: peak of the US housing bubble in two thousand and seven,

510
00:26:14,680 --> 00:26:17,040
Speaker 1: it was taking three dollars of debt to create a

511
00:26:17,040 --> 00:26:20,159
Speaker 1: dollar of GDP growth in the United States. Today, in China,

512
00:26:20,359 --> 00:26:22,880
Speaker 1: it's taking four dollars of debt to create a dollar

513
00:26:22,920 --> 00:26:26,119
Speaker 1: of GDP growth in that country. That's been the explosion

514
00:26:26,200 --> 00:26:29,959
Speaker 1: in debt in China this decade. Your reference Russia before also,

515
00:26:30,240 --> 00:26:33,359
Speaker 1: I've always sort of of Russia as a very challenging

516
00:26:33,400 --> 00:26:37,680
Speaker 1: place to invest corruption rule lord just you know, and

517
00:26:37,800 --> 00:26:40,960
Speaker 1: this is before Putin, and now it's even more challenging.

518
00:26:41,320 --> 00:26:44,159
Speaker 1: Is Russia and investable nation. But I think there are

519
00:26:44,160 --> 00:26:46,280
Speaker 1: pockets of investment out there. But I think as far

520
00:26:46,320 --> 00:26:48,920
Speaker 1: as Russia is concerned, it's really gone what I call

521
00:26:49,119 --> 00:26:51,760
Speaker 1: X growth, which is that X growth, yeah, which is

522
00:26:51,760 --> 00:26:53,520
Speaker 1: that The best you can hope out of Russia for

523
00:26:53,600 --> 00:26:56,280
Speaker 1: economic growth rates now is one or two percent. You know,

524
00:26:56,359 --> 00:26:58,560
Speaker 1: this is not an emerging market type growth rate that

525
00:26:58,600 --> 00:27:02,160
Speaker 1: you would think. It's demographics are terribly against it. They're

526
00:27:02,280 --> 00:27:07,040
Speaker 1: losing educated populations and total populations. And and then what's

527
00:27:07,040 --> 00:27:09,760
Speaker 1: happening also is the fact that the investment environment Russia

528
00:27:09,920 --> 00:27:12,800
Speaker 1: is very difficult. The only thing that Putin has done

529
00:27:12,840 --> 00:27:15,800
Speaker 1: to his credit is made the best of a bad situation.

530
00:27:15,920 --> 00:27:17,959
Speaker 1: He's trying his best to make sure that the country

531
00:27:18,119 --> 00:27:22,640
Speaker 1: doesn't go bankrupt at these loil prices. So he's adopted austerity.

532
00:27:22,720 --> 00:27:25,719
Speaker 1: He's allowed the central bank to devalue the currency and

533
00:27:25,760 --> 00:27:29,080
Speaker 1: to raise interest rates to keep inflation under control. He's

534
00:27:29,080 --> 00:27:31,000
Speaker 1: really doing that. So I think that his game is

535
00:27:31,119 --> 00:27:34,720
Speaker 1: very clear, which is that keep the economy from imploding,

536
00:27:34,760 --> 00:27:38,240
Speaker 1: particularly on metrics that really hurt the people, which is inflation.

537
00:27:38,480 --> 00:27:41,720
Speaker 1: And he focuses much more on invoking nationalism to remain popular.

538
00:27:42,240 --> 00:27:44,560
Speaker 1: But the economy is ex growth that I mean, like

539
00:27:44,640 --> 00:27:47,439
Speaker 1: it's now flat flat at best, you know, one to

540
00:27:47,440 --> 00:27:49,600
Speaker 1: t percent type economic growth rate from Russia for the

541
00:27:49,600 --> 00:27:52,800
Speaker 1: foreseable future. We're speaking with Morgan Stanley is Russia Sharma

542
00:27:52,880 --> 00:27:55,879
Speaker 1: about emerging markets. He's the author of the Rise and

543
00:27:55,960 --> 00:27:58,880
Speaker 1: Fall of Nations. Let's get a little macro in our

544
00:27:58,880 --> 00:28:02,879
Speaker 1: conversation about em When I look at forces around the world,

545
00:28:03,280 --> 00:28:08,200
Speaker 1: are emerging market forces more susceptible to boom and bus

546
00:28:08,200 --> 00:28:11,600
Speaker 1: cycles than developed nations or is it a similar pattern

547
00:28:11,680 --> 00:28:15,159
Speaker 1: that they follow relative to what the US and Japan

548
00:28:15,280 --> 00:28:18,159
Speaker 1: and Europe experiences. Yeah, I think that again, we have

549
00:28:18,200 --> 00:28:20,920
Speaker 1: to sort of classify which emerging market we're talking about,

550
00:28:20,920 --> 00:28:23,760
Speaker 1: Like the Chinese stock market. The domestic stock market is

551
00:28:23,800 --> 00:28:25,880
Speaker 1: like it's had it's had a wild run for the best,

552
00:28:26,440 --> 00:28:28,760
Speaker 1: a wild run which is unprecedented, right, I mean, as

553
00:28:28,960 --> 00:28:31,280
Speaker 1: one sort of wise person put in that, it's like

554
00:28:31,280 --> 00:28:34,240
Speaker 1: a casino without rules. Right, So what about the sense

555
00:28:34,480 --> 00:28:38,280
Speaker 1: what about indexes in in and markets in India. Yeah,

556
00:28:38,320 --> 00:28:40,480
Speaker 1: but I'm saying that I think that India has a

557
00:28:40,520 --> 00:28:43,480
Speaker 1: healthier stock market. I mean it's a deeper capital market,

558
00:28:43,600 --> 00:28:46,320
Speaker 1: So I think that India is better deeper capital markets

559
00:28:46,320 --> 00:28:48,640
Speaker 1: in China, well in terms of the domestic market. Yeah,

560
00:28:48,680 --> 00:28:51,760
Speaker 1: in terms in terms of by deeper, I mean what

561
00:28:51,800 --> 00:28:54,920
Speaker 1: I mean is more well regulated to work we have

562
00:28:55,000 --> 00:28:57,600
Speaker 1: in China and less susceptible to the booms and bust.

563
00:28:57,640 --> 00:28:59,760
Speaker 1: To the Chinese stock market, I mean the chance market

564
00:28:59,760 --> 00:29:02,680
Speaker 1: is very deep in terms of the amount of liquidity

565
00:29:02,680 --> 00:29:05,080
Speaker 1: and turnover that huge in China, but it seems like

566
00:29:05,120 --> 00:29:08,000
Speaker 1: it's a housewife's day trading phenomena. That yeah. I mean

567
00:29:08,000 --> 00:29:09,720
Speaker 1: there are parts of it, you know, which are that too.

568
00:29:09,840 --> 00:29:12,360
Speaker 1: So that's the problem. Like the Chinese stock market, the

569
00:29:12,400 --> 00:29:15,680
Speaker 1: Chinese stock market has never reflected economic growth in China,

570
00:29:15,720 --> 00:29:18,680
Speaker 1: there's no connection between economic growth and the Chinese stock

571
00:29:18,680 --> 00:29:20,800
Speaker 1: markets performance of the last twenty three years. Now, some

572
00:29:20,840 --> 00:29:23,840
Speaker 1: people would argue that it's hard to draw a straight

573
00:29:23,880 --> 00:29:27,440
Speaker 1: line between US economic growth and the stock market. They

574
00:29:27,480 --> 00:29:31,560
Speaker 1: don't always sync up exactly there over long periods of time.

575
00:29:31,640 --> 00:29:34,480
Speaker 1: A long expansion tends to lead to a long ball market.

576
00:29:34,520 --> 00:29:38,000
Speaker 1: But we have a tendency to sort of occasionally go up.

577
00:29:38,120 --> 00:29:40,160
Speaker 1: Just look at the gains of the past seven years

578
00:29:40,360 --> 00:29:44,040
Speaker 1: of the market relative to the comes true. But you know,

579
00:29:44,080 --> 00:29:46,120
Speaker 1: but at least like you get a directionally there's yeah,

580
00:29:46,120 --> 00:29:47,720
Speaker 1: you know, I mean, you know direction, you get some

581
00:29:47,840 --> 00:29:50,600
Speaker 1: similarity on overlaid on this. When you get such easy

582
00:29:50,640 --> 00:29:53,720
Speaker 1: monetary policy, you end up getting you know, financial excesses.

583
00:29:53,880 --> 00:29:57,400
Speaker 1: But in China's case, you can line it's like totally random.

584
00:29:57,520 --> 00:30:00,440
Speaker 1: So I'm saying that, and that's not true for most countries.

585
00:30:00,480 --> 00:30:03,440
Speaker 1: If you draw a line over time over how the

586
00:30:03,480 --> 00:30:08,320
Speaker 1: stock market has overall economy has done, there is a relationship.

587
00:30:08,520 --> 00:30:11,560
Speaker 1: Let's talk about South America, where here in the United

588
00:30:11,560 --> 00:30:13,479
Speaker 1: States we really don't pay a whole lot of attention

589
00:30:13,560 --> 00:30:17,880
Speaker 1: to as investors. There's been some social turmoil, there's been

590
00:30:17,920 --> 00:30:21,000
Speaker 1: some political turmoil in South America. What do you see

591
00:30:21,080 --> 00:30:23,560
Speaker 1: going on there and what's of interest to you? But

592
00:30:23,680 --> 00:30:26,280
Speaker 1: I think that Latin America is one place which is

593
00:30:26,320 --> 00:30:29,080
Speaker 1: breaking for the better on the political front, right that

594
00:30:29,400 --> 00:30:31,680
Speaker 1: at a time when populism is on the rise in

595
00:30:32,160 --> 00:30:35,120
Speaker 1: so many parts of the Western world, Latin America is

596
00:30:35,120 --> 00:30:37,480
Speaker 1: seeing something very interesting, which that you are seeing the

597
00:30:37,520 --> 00:30:42,080
Speaker 1: return of economic orthodoxy in Latin America and names in countries.

598
00:30:42,280 --> 00:30:45,120
Speaker 1: For example, you take the classic case of Brazil that

599
00:30:45,240 --> 00:30:48,560
Speaker 1: in Brazil's case, that that country had really sort of

600
00:30:49,280 --> 00:30:51,920
Speaker 1: gone from being the start of the emerging world last

601
00:30:51,920 --> 00:30:54,240
Speaker 1: decade to being the posted child of ward. All is

602
00:30:54,280 --> 00:30:57,240
Speaker 1: wrong with the entire emerging world. Just there are messes,

603
00:30:57,280 --> 00:31:01,240
Speaker 1: their complete mess But having said that, in the Dilma world,

604
00:31:01,280 --> 00:31:03,800
Speaker 1: after she was impeached and you have a new administration

605
00:31:03,840 --> 00:31:06,200
Speaker 1: out there, the kind of reforms that they're taking place

606
00:31:06,320 --> 00:31:10,480
Speaker 1: are quite encouraging. Now it's a terrible situation still, but

607
00:31:10,560 --> 00:31:13,480
Speaker 1: at the margin, starting to turn around, starting to turn around,

608
00:31:13,480 --> 00:31:15,800
Speaker 1: and what they have done is quite remarkable in terms

609
00:31:15,800 --> 00:31:18,320
Speaker 1: of starting the cleanup process after the big mess which

610
00:31:18,360 --> 00:31:21,760
Speaker 1: was left behind by the previous government. You talk about reforms,

611
00:31:21,800 --> 00:31:27,080
Speaker 1: you discuss why reforms are so important to emerging market economies.

612
00:31:27,560 --> 00:31:30,040
Speaker 1: Go into a little detail about that, and you mentioned

613
00:31:30,040 --> 00:31:32,040
Speaker 1: it in the book. I know you've written about it

614
00:31:32,080 --> 00:31:36,160
Speaker 1: in the past. Why is economic reforms so significant to

615
00:31:36,600 --> 00:31:39,320
Speaker 1: emerging market countries? Well, I think that you know, reform

616
00:31:39,360 --> 00:31:42,200
Speaker 1: is significant for all countries, but in emerging markets there's

617
00:31:42,200 --> 00:31:44,480
Speaker 1: so much to be done because there's so much of

618
00:31:44,520 --> 00:31:47,560
Speaker 1: the economy which is functioning in an inefficient way in

619
00:31:47,560 --> 00:31:49,840
Speaker 1: these countries and therefore the per capita in contains to

620
00:31:49,880 --> 00:31:51,920
Speaker 1: be much lower that there's so much which can be

621
00:31:51,960 --> 00:31:54,160
Speaker 1: done to clean that up and for those countries to

622
00:31:54,200 --> 00:31:57,200
Speaker 1: move to a much higher per capita incomplain. But I mean,

623
00:31:57,440 --> 00:31:59,440
Speaker 1: so it's just the function of you gets get her

624
00:31:59,480 --> 00:32:03,400
Speaker 1: act together. The population makes more, has a higher income

625
00:32:03,440 --> 00:32:07,520
Speaker 1: per person, and everybody is But the reforms have to

626
00:32:07,560 --> 00:32:10,360
Speaker 1: be sort of very country specific in terms of what's required,

627
00:32:10,520 --> 00:32:13,040
Speaker 1: right Like give you example, like in the case of

628
00:32:13,040 --> 00:32:15,840
Speaker 1: India today, it's the banking system which is a complete mess.

629
00:32:15,920 --> 00:32:17,200
Speaker 1: So you need you need to clean up of the

630
00:32:17,200 --> 00:32:20,520
Speaker 1: banking system much more sort of private sector involvement in it,

631
00:32:20,560 --> 00:32:23,920
Speaker 1: because the banking system is so dominated by public sector

632
00:32:24,000 --> 00:32:26,280
Speaker 1: or government owned banks. So that's like a adea of

633
00:32:26,440 --> 00:32:29,120
Speaker 1: reform as far is they need a little fatism there

634
00:32:29,120 --> 00:32:32,239
Speaker 1: and spending a You can argue that in terms of it. Now,

635
00:32:32,320 --> 00:32:35,080
Speaker 1: some of the countries, the reform requirement maybe something very

636
00:32:35,280 --> 00:32:37,080
Speaker 1: different in terms of what needs to be done, like

637
00:32:37,120 --> 00:32:39,560
Speaker 1: in the case of Indonesia, like there was a huge

638
00:32:39,600 --> 00:32:43,120
Speaker 1: amount of a black economy, unaccounted economy. How to bring

639
00:32:43,160 --> 00:32:45,920
Speaker 1: that back into the mainstream. Isn't that a common problem

640
00:32:46,000 --> 00:32:48,880
Speaker 1: in in a lot of countries. Yeah, that's a common problem,

641
00:32:48,920 --> 00:32:51,400
Speaker 1: but more so when some than the others. Right now,

642
00:32:51,920 --> 00:32:54,040
Speaker 1: So I think that in terms of reforms is a

643
00:32:54,160 --> 00:32:56,840
Speaker 1: catch all term, but for each country we have to

644
00:32:56,920 --> 00:32:59,360
Speaker 1: be sort of careful about what exactly we mean by

645
00:32:59,360 --> 00:33:02,560
Speaker 1: reform and what exactly can be done politically, because I'm

646
00:33:02,560 --> 00:33:05,040
Speaker 1: not interested in sort of rattling off that X, y

647
00:33:05,080 --> 00:33:07,920
Speaker 1: Z country needs to do ABC. I'm more interested in

648
00:33:08,160 --> 00:33:10,800
Speaker 1: what is the political environment like in a country and

649
00:33:10,880 --> 00:33:12,959
Speaker 1: what sort of reforms are likely to be passed and

650
00:33:13,040 --> 00:33:15,680
Speaker 1: what that means for that countries economic growth, trade going forward.

651
00:33:15,800 --> 00:33:18,600
Speaker 1: We've been speaking with Ruth Sheer Sharma. He is Morgan

652
00:33:18,640 --> 00:33:22,280
Speaker 1: Stanley's head of Global Equities and the author, most recently

653
00:33:22,440 --> 00:33:25,640
Speaker 1: of the rise and fall of nations. If you enjoy

654
00:33:25,720 --> 00:33:28,760
Speaker 1: this conversation, be sure and stick around for our podcast extras.

655
00:33:28,920 --> 00:33:32,040
Speaker 1: Will we keep the tape rolling and continue discussing all

656
00:33:32,160 --> 00:33:36,040
Speaker 1: things emerging market. You can read my daily column on

657
00:33:36,120 --> 00:33:39,040
Speaker 1: Bloomberg View dot com or follow me on Twitter at

658
00:33:39,160 --> 00:33:42,840
Speaker 1: rid Holts. We love your emails and comments. Be sure

659
00:33:42,880 --> 00:33:46,640
Speaker 1: to write to us at m IB podcast at Bloomberg

660
00:33:46,680 --> 00:33:49,640
Speaker 1: dot net. I'm Barry rid Halts. You've been listening to

661
00:33:49,760 --> 00:33:55,720
Speaker 1: Masters in Business on Bloomberg Radio, brought to you by

662
00:33:55,760 --> 00:33:58,960
Speaker 1: Bank of America Merrill Lynch seeing what others have seen,

663
00:33:59,240 --> 00:34:02,760
Speaker 1: but uncovering what others may not. Global Research that helps

664
00:34:02,760 --> 00:34:06,720
Speaker 1: you harness disruption. Voted top global research firm five years running,

665
00:34:07,000 --> 00:34:12,319
Speaker 1: Merrill Lynch, Pierce, Fenner and Smith Incorporated. Welcome to the podcast,

666
00:34:12,600 --> 00:34:14,200
Speaker 1: Russ here. Thank you so much for doing this and

667
00:34:14,239 --> 00:34:16,680
Speaker 1: being so generous with your time. I I find em

668
00:34:16,760 --> 00:34:20,560
Speaker 1: to be a fascinating area and it's it's a pleasure

669
00:34:20,560 --> 00:34:22,799
Speaker 1: to speak to an expert in It great to be here, Mary,

670
00:34:22,840 --> 00:34:25,160
Speaker 1: thanks for having me. So we missed a bunch of

671
00:34:25,280 --> 00:34:28,480
Speaker 1: questions um during the broadcast portion, and I there's a

672
00:34:28,520 --> 00:34:31,359
Speaker 1: few I really want to jump into and you said

673
00:34:31,400 --> 00:34:34,400
Speaker 1: a few things that I took some notes and wanted

674
00:34:34,440 --> 00:34:38,200
Speaker 1: to follow up on. UM. You referenced e t f

675
00:34:38,280 --> 00:34:41,120
Speaker 1: s and kind of just blindly buying as opposed to

676
00:34:41,680 --> 00:34:45,439
Speaker 1: focusing on countries. I remember if you went back ten

677
00:34:45,560 --> 00:34:49,320
Speaker 1: or twenty years and you wanted to invest in emerging markets,

678
00:34:49,840 --> 00:34:51,960
Speaker 1: it was really hard to do. So there were a

679
00:34:52,000 --> 00:34:55,480
Speaker 1: handful of managers who specialized in it. You had a

680
00:34:55,480 --> 00:34:58,640
Speaker 1: lot of currency risk, the funds to do it was

681
00:34:58,760 --> 00:35:04,440
Speaker 1: pretty expensive. It wasn't cheap, and of course everybody suffers

682
00:35:04,440 --> 00:35:07,799
Speaker 1: from the home country bias, their wildly overexposed to where

683
00:35:07,840 --> 00:35:09,960
Speaker 1: they live and under exposed to the rest of the world.

684
00:35:10,880 --> 00:35:16,040
Speaker 1: But what is it about UM the recent changes in

685
00:35:16,120 --> 00:35:21,080
Speaker 1: emerging markets that have allowed more and more people access

686
00:35:21,120 --> 00:35:25,239
Speaker 1: to fast, easy and expensive ways to invest in the space. No,

687
00:35:25,400 --> 00:35:26,920
Speaker 1: I think that in terms of that, this is a

688
00:35:26,960 --> 00:35:29,360
Speaker 1: broad train that we're seeing across the world, which exactly

689
00:35:29,360 --> 00:35:31,759
Speaker 1: which is, you know, a move towards passive away from

690
00:35:31,800 --> 00:35:34,400
Speaker 1: active kind of investing. And my point is that in

691
00:35:34,440 --> 00:35:37,000
Speaker 1: the emerging world especially, and I can argue that that's

692
00:35:37,040 --> 00:35:40,360
Speaker 1: wrong and even in the developed world, but in the

693
00:35:40,400 --> 00:35:42,759
Speaker 1: emerging world in particular, that's the wrong approaches because the

694
00:35:42,800 --> 00:35:46,080
Speaker 1: differences are so sharp and the and the execution is

695
00:35:46,120 --> 00:35:48,640
Speaker 1: also much more difficult, you know, like just to buy

696
00:35:48,680 --> 00:35:52,920
Speaker 1: stuff which is passive. And then over time, emerging market

697
00:35:52,920 --> 00:35:56,400
Speaker 1: fund managers do tend to outperform more than they developed

698
00:35:56,440 --> 00:35:59,000
Speaker 1: market peers. So I think that why is that is

699
00:35:59,040 --> 00:36:01,480
Speaker 1: that the first to growth rate is that the well

700
00:36:01,520 --> 00:36:05,840
Speaker 1: because I think that possibly more inefficiencies that exploit the differences,

701
00:36:05,880 --> 00:36:08,279
Speaker 1: the inefficiencies that you can exploit those much more in

702
00:36:08,360 --> 00:36:10,879
Speaker 1: the emerging world. So I think that over time there

703
00:36:10,960 --> 00:36:15,759
Speaker 1: is benefit towards UH investing actively in the emerging world.

704
00:36:15,760 --> 00:36:19,280
Speaker 1: So so let's talk about an active investment in em

705
00:36:19,320 --> 00:36:22,120
Speaker 1: If you look at the universe of possible frontier market

706
00:36:22,120 --> 00:36:25,600
Speaker 1: and emerging market investments, what do you think are the

707
00:36:25,680 --> 00:36:29,520
Speaker 1: most attractive countries today? And conversely, what are the least

708
00:36:29,520 --> 00:36:31,719
Speaker 1: attractive countries? Yeah, I think that if you I mean,

709
00:36:31,760 --> 00:36:33,640
Speaker 1: I uh, I think that it's easy to start with

710
00:36:33,719 --> 00:36:35,960
Speaker 1: least attractive. I still find that China is the biggest

711
00:36:36,040 --> 00:36:38,200
Speaker 1: risk in the emerging world. Yeah, because because of the

712
00:36:38,239 --> 00:36:40,120
Speaker 1: kiss of debt that we spoke about all that. So

713
00:36:40,360 --> 00:36:41,920
Speaker 1: there's a come up and its coming and it just

714
00:36:41,960 --> 00:36:44,040
Speaker 1: hasn't it. Yeah, yeah, yeah, yeah, And even if it

715
00:36:44,080 --> 00:36:46,279
Speaker 1: doesn't hit in a big crisis blow, it's like an

716
00:36:46,280 --> 00:36:50,120
Speaker 1: insidious sort of uh trend, which is that it sort

717
00:36:50,160 --> 00:36:53,160
Speaker 1: of eats away slowly at the growth rate over time.

718
00:36:53,200 --> 00:36:56,359
Speaker 1: So I think China is so to let me out,

719
00:36:56,520 --> 00:37:00,160
Speaker 1: let let me jump in here and and digress us

720
00:37:00,160 --> 00:37:04,400
Speaker 1: to a related question. If China has a debt problem

721
00:37:04,480 --> 00:37:08,960
Speaker 1: and and a huge economic slowdown caused by that, what

722
00:37:09,040 --> 00:37:10,920
Speaker 1: does that mean for the rest of the world. I

723
00:37:11,000 --> 00:37:14,279
Speaker 1: really look at China as more of a reflection of

724
00:37:14,320 --> 00:37:20,160
Speaker 1: how the industrialized or or Western advanced economies are doing,

725
00:37:20,440 --> 00:37:24,000
Speaker 1: because they're the manufacturing department for the rest of the world.

726
00:37:24,160 --> 00:37:25,960
Speaker 1: But having said that, I think that there is a

727
00:37:26,120 --> 00:37:30,000
Speaker 1: sort of big difference here, which is that dead levels

728
00:37:30,000 --> 00:37:33,040
Speaker 1: and the rest of the world have stopped going up much, right,

729
00:37:33,200 --> 00:37:35,840
Speaker 1: and if anything, they've begun to de leverage. And sometimes

730
00:37:35,960 --> 00:37:37,799
Speaker 1: one of the questions we didn't one of the these

731
00:37:37,840 --> 00:37:41,280
Speaker 1: we didn't get exact exactly. So some countries are de leveraging,

732
00:37:41,440 --> 00:37:45,240
Speaker 1: including you know, countries such a Brazil and Russia possibly

733
00:37:45,760 --> 00:37:49,399
Speaker 1: and even in the United States, the government debts going

734
00:37:49,480 --> 00:37:51,480
Speaker 1: up on the private sector side, that dead levels of

735
00:37:51,520 --> 00:37:54,200
Speaker 1: at least stabilize, you're not going up anymore, particularly household

736
00:37:54,200 --> 00:37:56,680
Speaker 1: in the financial side. But in China's case, debt has

737
00:37:56,719 --> 00:38:01,480
Speaker 1: been exploding like never before, like almost no country before it.

738
00:38:01,840 --> 00:38:04,920
Speaker 1: So I think that it what's their total amount of

739
00:38:04,960 --> 00:38:08,080
Speaker 1: debt and what's their debt to GDP depends how you calculated,

740
00:38:08,160 --> 00:38:11,000
Speaker 1: but something between two dent as the share of the

741
00:38:11,040 --> 00:38:15,200
Speaker 1: GDP China's debt today. That's huge, and there to the

742
00:38:15,280 --> 00:38:18,239
Speaker 1: United States were barely similar. It's no, I mean, it's

743
00:38:18,280 --> 00:38:20,279
Speaker 1: I'm talking about total debt. I'm talking about not so

744
00:38:20,400 --> 00:38:25,000
Speaker 1: private exactly. So the US dead levels are almost similar

745
00:38:25,040 --> 00:38:28,600
Speaker 1: to China. But the differences it's twofold here. One that

746
00:38:28,719 --> 00:38:31,640
Speaker 1: the increase in China's debt has been much sharper than

747
00:38:31,680 --> 00:38:34,560
Speaker 1: anything that the United States is. And to that typically

748
00:38:34,600 --> 00:38:36,680
Speaker 1: the richer you are, the more debt you can afford

749
00:38:36,719 --> 00:38:39,000
Speaker 1: because you have that much wealth to offset it. But

750
00:38:39,040 --> 00:38:41,640
Speaker 1: in China's case, the dead levels are as high as

751
00:38:41,640 --> 00:38:44,200
Speaker 1: the United States today as the share of its economy.

752
00:38:44,200 --> 00:38:48,640
Speaker 1: Even the Chinese per capita income, it's wealth is a

753
00:38:48,640 --> 00:38:51,799
Speaker 1: fraction of that of the United States. Yeah, so I

754
00:38:51,800 --> 00:38:54,759
Speaker 1: think that the Chinese dead situation is very troubling to me,

755
00:38:55,360 --> 00:38:58,120
Speaker 1: what what other countries do you think are potentially problematic

756
00:38:58,160 --> 00:39:01,800
Speaker 1: from an investor's perspective. Well, I'm still concerned about Turkey

757
00:39:01,880 --> 00:39:04,600
Speaker 1: because I think that in Turkey the interest rates in

758
00:39:04,640 --> 00:39:06,480
Speaker 1: the U S. As they go up, they're very dependent

759
00:39:06,520 --> 00:39:09,600
Speaker 1: on foreign capital. So Turkey is still some country that

760
00:39:09,680 --> 00:39:13,160
Speaker 1: I'm I'm concerned about. I think that's South Africa, Africa.

761
00:39:13,480 --> 00:39:16,359
Speaker 1: I think the African growth story in many parts is over.

762
00:39:17,320 --> 00:39:19,440
Speaker 1: You know, something that we were all sort of looking

763
00:39:19,480 --> 00:39:22,000
Speaker 1: to Africa rising now that are still pockets in Africa.

764
00:39:22,040 --> 00:39:24,479
Speaker 1: So I wouldn't generalize about the entire continent, but many

765
00:39:24,520 --> 00:39:28,000
Speaker 1: parts of Africa, from Nigeria to South Africa face a

766
00:39:28,120 --> 00:39:31,640
Speaker 1: rather bleak growth future. So I think the very problematic

767
00:39:31,680 --> 00:39:35,439
Speaker 1: the whole. Yes, I think then in a deglobalizing world,

768
00:39:35,520 --> 00:39:39,200
Speaker 1: countries such as Korea, Taiwan, and even Hong Kong, Singapore,

769
00:39:39,239 --> 00:39:42,320
Speaker 1: all these countries which relied much more on external demand

770
00:39:42,360 --> 00:39:46,239
Speaker 1: to grow, I think that these countries are face much

771
00:39:46,239 --> 00:39:48,919
Speaker 1: bleaker future than they did in the past. So that's

772
00:39:48,920 --> 00:39:51,720
Speaker 1: the bleak side, the dark side of the of the world.

773
00:39:51,800 --> 00:39:55,000
Speaker 1: On the positive side, I think that you know, in

774
00:39:55,040 --> 00:39:57,239
Speaker 1: my book of course, I talked about both developed and

775
00:39:57,280 --> 00:39:59,560
Speaker 1: Emerging Countries my new book. I think that in the

776
00:39:59,560 --> 00:40:03,120
Speaker 1: emerging world, I think the Indian subcontinent looks okay. The

777
00:40:03,520 --> 00:40:06,040
Speaker 1: growth prospects look decent. That Eastern Europe I think it's

778
00:40:06,040 --> 00:40:08,440
Speaker 1: cleaned up its act a lot, Poland check Romania, those

779
00:40:08,480 --> 00:40:11,320
Speaker 1: kind of countries. I think Latin America, as I mentioned,

780
00:40:11,320 --> 00:40:14,360
Speaker 1: because of the politics, is getting better, whether it's Brazil,

781
00:40:14,560 --> 00:40:17,920
Speaker 1: but more specifically Argentina, Peru, these kind of countries, the

782
00:40:17,960 --> 00:40:21,200
Speaker 1: economic prospects are improving. And then the developed world two

783
00:40:21,200 --> 00:40:24,279
Speaker 1: countries like the United States Germany, to me, they look fine. Now,

784
00:40:24,320 --> 00:40:26,360
Speaker 1: you know, like we all here in the United States

785
00:40:26,719 --> 00:40:29,440
Speaker 1: moan about all the problems that we have and our

786
00:40:29,440 --> 00:40:31,400
Speaker 1: economic growth has been so low and this is the

787
00:40:31,400 --> 00:40:34,520
Speaker 1: weakest economic recovery and post war history. All true, but

788
00:40:34,600 --> 00:40:37,120
Speaker 1: on a relative basis, what we sort of have to

789
00:40:37,239 --> 00:40:39,520
Speaker 1: account for is that the rest of the world faces

790
00:40:39,560 --> 00:40:42,560
Speaker 1: even greater problems. So whenever there's any problem in the world,

791
00:40:42,600 --> 00:40:44,879
Speaker 1: people are still fleeing to the U. S Dollar, right,

792
00:40:44,920 --> 00:40:48,399
Speaker 1: So because this is still the reserve currency of the world.

793
00:40:48,440 --> 00:40:51,680
Speaker 1: There's no other currency out there to challenge the US dollar,

794
00:40:54,640 --> 00:40:58,160
Speaker 1: are I mean, it's facing all sorts of problems just now,

795
00:40:58,200 --> 00:41:00,920
Speaker 1: and it's financial sector is quite rittle, So this is

796
00:41:00,920 --> 00:41:03,880
Speaker 1: not a currency that's about to take over the world

797
00:41:03,920 --> 00:41:06,359
Speaker 1: as the next reserve currency. So I'd say that. And

798
00:41:06,400 --> 00:41:09,520
Speaker 1: Germany is still doing very well despite all the sort

799
00:41:09,520 --> 00:41:11,839
Speaker 1: of problems in Europe, you know, Like it seems to

800
00:41:11,840 --> 00:41:14,719
Speaker 1: me that a lot of the core European countries are

801
00:41:14,760 --> 00:41:20,000
Speaker 1: becoming more uh sort of integrated rather than turning skeptical

802
00:41:21,400 --> 00:41:26,000
Speaker 1: after the referendument places such as UK. So I would say,

803
00:41:26,000 --> 00:41:28,080
Speaker 1: there are enough bright spots in the world. But what

804
00:41:28,120 --> 00:41:29,880
Speaker 1: we have to do, and this is a very important

805
00:41:29,920 --> 00:41:32,520
Speaker 1: concept that introduced in the book, is to lower the

806
00:41:32,560 --> 00:41:35,840
Speaker 1: baseline for economic success, which is too in other words,

807
00:41:35,840 --> 00:41:38,920
Speaker 1: to start looking for four or five percent. Two and

808
00:41:38,960 --> 00:41:41,200
Speaker 1: a half percent growth is fine, yeah, And I'm saying

809
00:41:41,200 --> 00:41:43,520
Speaker 1: that to like for the develop world, I'd say even

810
00:41:43,840 --> 00:41:45,840
Speaker 1: they see nor the one and a half two percent

811
00:41:45,960 --> 00:41:48,840
Speaker 1: is fine because we have an anchoring bias, as we

812
00:41:48,880 --> 00:41:50,719
Speaker 1: call it, which that we look at what we were

813
00:41:50,719 --> 00:41:53,279
Speaker 1: growing at the last twenty thirty years. And it's not

814
00:41:53,360 --> 00:41:56,720
Speaker 1: going to say exactly and why right as a point

815
00:41:56,760 --> 00:41:59,680
Speaker 1: out that it's because of demographics have changed. You just

816
00:41:59,680 --> 00:42:03,640
Speaker 1: can't liver those economic growth rates anymore. The dead supercycle

817
00:42:03,680 --> 00:42:06,040
Speaker 1: has ended in most countries. The massive increase in global

818
00:42:06,080 --> 00:42:10,360
Speaker 1: debt we saw between night has come to a stall,

819
00:42:10,440 --> 00:42:12,960
Speaker 1: barring maybe in odd China, but and they're facing problems

820
00:42:12,960 --> 00:42:14,800
Speaker 1: because of that, but generally it's come to a stall.

821
00:42:15,200 --> 00:42:17,600
Speaker 1: And then you have an head of the globalization which

822
00:42:17,680 --> 00:42:20,920
Speaker 1: the nations are turning more inwards. So the productivity boost

823
00:42:20,920 --> 00:42:24,160
Speaker 1: from globalization is behind us now. So I think that

824
00:42:24,200 --> 00:42:26,480
Speaker 1: these are reasons why we should not expect to grow,

825
00:42:27,000 --> 00:42:30,120
Speaker 1: and that fits in with long term history to understand

826
00:42:30,120 --> 00:42:32,399
Speaker 1: that the period between nineteen fifty and two tho eight

827
00:42:32,800 --> 00:42:36,000
Speaker 1: was a very exceptional period and that period is not

828
00:42:36,120 --> 00:42:39,200
Speaker 1: coming back anytime soon. And once we accept that and

829
00:42:39,239 --> 00:42:42,560
Speaker 1: lower the baseline for economic success, as you say that

830
00:42:42,600 --> 00:42:44,719
Speaker 1: in the developed world, bring it down to one and

831
00:42:44,760 --> 00:42:48,240
Speaker 1: a half two percent, in the emerging world, bring it down,

832
00:42:48,320 --> 00:42:52,480
Speaker 1: you know, from whatever five plus for many poor countries,

833
00:42:53,440 --> 00:42:56,960
Speaker 1: to bring that all down. So lower your growth expectations everywhere.

834
00:42:58,000 --> 00:42:59,759
Speaker 1: Of course, the poorer you are, the faster your growth

835
00:42:59,880 --> 00:43:02,080
Speaker 1: rate can potentially be. We'll try from a lower base,

836
00:43:02,440 --> 00:43:05,839
Speaker 1: but lower growth expectations everywhere, and then that's the new

837
00:43:05,920 --> 00:43:08,160
Speaker 1: math for economic success and you'll be able to identify

838
00:43:08,200 --> 00:43:10,760
Speaker 1: winners more easily. So when you look around the world,

839
00:43:10,880 --> 00:43:14,320
Speaker 1: let's let's talk a little bit about valuation. Where are there,

840
00:43:15,040 --> 00:43:18,799
Speaker 1: um the countries that you think have the upside and

841
00:43:19,040 --> 00:43:21,960
Speaker 1: prices don't quite reflect it yet. Where where are is

842
00:43:22,000 --> 00:43:25,480
Speaker 1: their value out there? And and what's pricy? Yeah, I

843
00:43:25,520 --> 00:43:27,759
Speaker 1: think that in terms of the fact is uh, that

844
00:43:27,880 --> 00:43:30,200
Speaker 1: gets a bit more tricky because I think that clearly

845
00:43:30,239 --> 00:43:32,839
Speaker 1: the US market is much pricier today. So even though

846
00:43:32,840 --> 00:43:35,600
Speaker 1: the economic prospects look okay, because of the fact that

847
00:43:35,640 --> 00:43:37,839
Speaker 1: you've had such a massive increase in asset prices here

848
00:43:37,880 --> 00:43:40,960
Speaker 1: due to the faith easy money policies that here assets

849
00:43:40,960 --> 00:43:43,960
Speaker 1: look very pricey to me in the United States, I

850
00:43:44,000 --> 00:43:48,080
Speaker 1: think internationally the prices look somewhat better. Europe in particual

851
00:43:48,400 --> 00:43:51,640
Speaker 1: more attractive. Yeah, Europe in particular looks more attractive, and

852
00:43:51,640 --> 00:43:54,120
Speaker 1: I'd say some parts of the emerging world too look

853
00:43:54,200 --> 00:43:56,799
Speaker 1: much more attractive. So so how do you balance, Well,

854
00:43:56,880 --> 00:44:01,000
Speaker 1: Europe looks cheaper and emerging markets look cheaper. But Europe

855
00:44:01,040 --> 00:44:02,720
Speaker 1: is a mess and it doesn't look like they're getting

856
00:44:02,719 --> 00:44:04,600
Speaker 1: their act together anytime soon. But there are parts of

857
00:44:05,960 --> 00:44:08,600
Speaker 1: so I spoke about Germany I spoke about, you know,

858
00:44:08,640 --> 00:44:11,880
Speaker 1: some countries and it's Germany cheap because you look at

859
00:44:11,719 --> 00:44:17,440
Speaker 1: at the southern countries that have had their problems, they

860
00:44:17,480 --> 00:44:19,520
Speaker 1: look dirt cheap. It looks like everybody is afraid to

861
00:44:19,520 --> 00:44:21,239
Speaker 1: put any money. Yeah, that's true, but I think that

862
00:44:21,640 --> 00:44:24,240
Speaker 1: it's so um I agree, but I'm saying the cheapness

863
00:44:24,280 --> 00:44:26,720
Speaker 1: cannot be the only criteria for investing. You know, cheapness

864
00:44:26,760 --> 00:44:29,680
Speaker 1: is it's got to be cheapness and growth potential is exactly.

865
00:44:29,719 --> 00:44:32,239
Speaker 1: So I think that. And you know, from a country perspective,

866
00:44:32,239 --> 00:44:33,960
Speaker 1: I find that if you get the growth rates correct,

867
00:44:34,719 --> 00:44:37,160
Speaker 1: then you're able to sort of do well in those countries.

868
00:44:37,200 --> 00:44:39,719
Speaker 1: Valuations take care of themselves exactly, so I'd say that,

869
00:44:40,080 --> 00:44:42,920
Speaker 1: so I wouldn't get too hung up on valuations. But generally,

870
00:44:43,000 --> 00:44:45,799
Speaker 1: because of the massive asset price inflation we've seen in

871
00:44:45,800 --> 00:44:48,080
Speaker 1: the world of the last few years led by the

872
00:44:48,160 --> 00:44:50,920
Speaker 1: United States and the easy policy of the faith, cheap

873
00:44:50,960 --> 00:44:53,480
Speaker 1: today is really a heart thing to find in the world.

874
00:44:53,680 --> 00:44:57,080
Speaker 1: So so we mentioned during the broadcast portion the first

875
00:44:57,120 --> 00:45:01,080
Speaker 1: two these the population and the global it's Asian. Let's

876
00:45:01,080 --> 00:45:03,080
Speaker 1: talk a little bit about the other two. And you

877
00:45:03,200 --> 00:45:07,440
Speaker 1: just referenced de leveraging. So what what is this The

878
00:45:07,440 --> 00:45:10,799
Speaker 1: impact of de leveraging on the global economent well, I

879
00:45:10,800 --> 00:45:12,960
Speaker 1: think it makes it more stable over time, but also

880
00:45:13,040 --> 00:45:15,000
Speaker 1: the fact that it sort of puts a downward pressure

881
00:45:15,000 --> 00:45:18,759
Speaker 1: on economic growth, which is that between two and eight

882
00:45:18,760 --> 00:45:20,800
Speaker 1: we've got a massive increase in global data as a

883
00:45:20,800 --> 00:45:23,080
Speaker 1: share of the economy, and that that made the economy

884
00:45:23,120 --> 00:45:27,040
Speaker 1: boom exactly like eventually, uh, you had a bust also

885
00:45:27,120 --> 00:45:29,160
Speaker 1: at the end of So I think it's very difficult

886
00:45:29,200 --> 00:45:32,000
Speaker 1: now to get those kind of massive increases in in

887
00:45:32,040 --> 00:45:34,160
Speaker 1: global dead because that also was a one off because

888
00:45:34,440 --> 00:45:37,680
Speaker 1: global inflation was falling and global interest rates declined a

889
00:45:37,719 --> 00:45:40,160
Speaker 1: lot in that period. And I think that those trains

890
00:45:40,160 --> 00:45:42,840
Speaker 1: of bottoming out now. So I don't see dead levels

891
00:45:42,880 --> 00:45:45,640
Speaker 1: going up across the world much in the next few years.

892
00:45:46,120 --> 00:45:49,279
Speaker 1: And then we have the entire prospect of the fourth

893
00:45:49,400 --> 00:45:52,000
Speaker 1: day I speak about, which is demotization. Before we get

894
00:45:52,000 --> 00:45:53,799
Speaker 1: to the fourth day, I have to ask you, so

895
00:45:54,400 --> 00:45:57,640
Speaker 1: Reinhardt wrote off did their eight hundred years of financial

896
00:45:57,680 --> 00:46:02,120
Speaker 1: folly and their perspective of is following a financial crisis

897
00:46:02,880 --> 00:46:05,359
Speaker 1: because of the leveraging, you have a tendency to get

898
00:46:05,400 --> 00:46:09,759
Speaker 1: this very subpar growth rate for a decade or so

899
00:46:09,920 --> 00:46:13,799
Speaker 1: and then things begin to revert back to normal. Are

900
00:46:13,840 --> 00:46:15,719
Speaker 1: you in the Rhinehart and Rod Gralf camp or do

901
00:46:15,760 --> 00:46:17,480
Speaker 1: you think that I think that, you know, the uh,

902
00:46:17,640 --> 00:46:21,239
Speaker 1: their analysis is like not that valid anymore, because now

903
00:46:21,239 --> 00:46:24,560
Speaker 1: we're in the eighth year after the global financial crisis,

904
00:46:24,600 --> 00:46:26,440
Speaker 1: and I think that the reason why the global economy

905
00:46:26,480 --> 00:46:29,239
Speaker 1: is weak today has to do a lot with the

906
00:46:29,280 --> 00:46:32,319
Speaker 1: fact that the demographics have changed that they mentioned. But

907
00:46:33,320 --> 00:46:35,600
Speaker 1: so I don't think that that what happened in two

908
00:46:35,640 --> 00:46:38,760
Speaker 1: thousand eight in terms of debt is that relevant today.

909
00:46:38,760 --> 00:46:40,840
Speaker 1: But what is the elevent is that that levels of

910
00:46:40,920 --> 00:46:43,520
Speaker 1: debt aren't going up that much anymore to turbo charge

911
00:46:43,560 --> 00:46:47,359
Speaker 1: growth the way the growth was turbo charged between two eight.

912
00:46:47,800 --> 00:46:51,160
Speaker 1: So there's a subtle difference here, But the secular change,

913
00:46:51,200 --> 00:46:55,279
Speaker 1: it's that's not it's not that subtle. That's a major change.

914
00:46:55,280 --> 00:46:58,480
Speaker 1: If you're not expanding the debt and contracting it, obviously

915
00:46:58,480 --> 00:47:00,480
Speaker 1: there's a big impact of that. So now let's go

916
00:47:00,560 --> 00:47:04,560
Speaker 1: to the fourth D, the D democratization. UM, we had

917
00:47:04,560 --> 00:47:08,880
Speaker 1: the Brexit vote, we had the Trump victory. What is

918
00:47:09,000 --> 00:47:13,000
Speaker 1: D democratization? Well, I think that you know, UM for

919
00:47:13,520 --> 00:47:17,600
Speaker 1: much of recent history, we saw an increase in the

920
00:47:17,680 --> 00:47:20,520
Speaker 1: number of democracies in the world, right, So we saw

921
00:47:20,560 --> 00:47:25,000
Speaker 1: this in the nineteen eighties nine nineties, that the number

922
00:47:25,040 --> 00:47:28,239
Speaker 1: of democracies in the world were expanding. But now what

923
00:47:28,280 --> 00:47:30,600
Speaker 1: we're seeing is that that is no longer the case.

924
00:47:30,640 --> 00:47:33,680
Speaker 1: In fact, the number of authoritarian regimes is increasing in

925
00:47:33,680 --> 00:47:35,680
Speaker 1: the world today, with even some countries which were on

926
00:47:35,719 --> 00:47:39,479
Speaker 1: the paths through democracy like Russia and Turkey, etcetera, turning

927
00:47:39,520 --> 00:47:42,520
Speaker 1: much more authoritarian now. So that's what I mean by

928
00:47:42,680 --> 00:47:46,040
Speaker 1: de democratization and what does that mean for the global economy.

929
00:47:46,480 --> 00:47:48,840
Speaker 1: What it means is much more volatility because what I

930
00:47:48,920 --> 00:47:54,560
Speaker 1: find our authority and regimes is that the policy becomes

931
00:47:54,640 --> 00:47:57,160
Speaker 1: much more unpredictable. So policy is good, you can get

932
00:47:57,239 --> 00:47:59,759
Speaker 1: very good economic growth rates. Where policy turns bad, they're

933
00:47:59,800 --> 00:48:01,960
Speaker 1: not ect and balances in place, and you can get

934
00:48:02,040 --> 00:48:05,080
Speaker 1: very bad outcomes as well. So much more volatility and

935
00:48:05,080 --> 00:48:08,400
Speaker 1: global economic growth due to d democratization. That's what I

936
00:48:08,440 --> 00:48:11,840
Speaker 1: think is going on, that the world is turning less

937
00:48:12,040 --> 00:48:17,239
Speaker 1: democratic after a massive increase in democracy in the nineties,

938
00:48:17,719 --> 00:48:20,320
Speaker 1: nineties and much of last decade, and an increase in

939
00:48:20,360 --> 00:48:23,000
Speaker 1: authority and figures across the world from pute into eard

940
00:48:23,120 --> 00:48:26,799
Speaker 1: one on the rise. So so how do you when

941
00:48:26,880 --> 00:48:29,080
Speaker 1: when you're looking at different countries and you're looking at

942
00:48:29,120 --> 00:48:33,399
Speaker 1: different regions of the world, how do you model geopolitical risk.

943
00:48:33,600 --> 00:48:35,600
Speaker 1: It's very difficult to model, but just to keep that

944
00:48:35,640 --> 00:48:38,000
Speaker 1: in mind, which is the fact that you know, for example,

945
00:48:38,000 --> 00:48:39,920
Speaker 1: people speak to me about that, what is something happened

946
00:48:39,920 --> 00:48:44,400
Speaker 1: to the South China Sea with China aggressive for Japan.

947
00:48:44,719 --> 00:48:47,719
Speaker 1: That's the kind of stuff which is extremely difficult to model, right,

948
00:48:47,760 --> 00:48:50,120
Speaker 1: but you can keep the impossible impossible, but at least

949
00:48:50,200 --> 00:48:53,200
Speaker 1: keep in mind that the potential for conflict is going

950
00:48:53,239 --> 00:48:56,280
Speaker 1: up across the world just today now because the United

951
00:48:56,320 --> 00:49:00,360
Speaker 1: States is in retreat right, which provided this big purity

952
00:49:00,400 --> 00:49:03,839
Speaker 1: umbrella for many countries, and defense spending is going up.

953
00:49:03,920 --> 00:49:05,560
Speaker 1: One of the big trains I think which we're seeing

954
00:49:05,560 --> 00:49:08,040
Speaker 1: in the marketplace, and something which I believe in is

955
00:49:08,080 --> 00:49:11,000
Speaker 1: that defense spending is bound to go up. The peace

956
00:49:11,000 --> 00:49:13,839
Speaker 1: dividend is over. Like we had this piece dividend where

957
00:49:13,840 --> 00:49:16,160
Speaker 1: you had one country which was sort of you know,

958
00:49:16,320 --> 00:49:20,640
Speaker 1: benefiting UH or other providing a benefit to many countries

959
00:49:21,320 --> 00:49:24,239
Speaker 1: as at loan superpower. I think those days are done now.

960
00:49:24,360 --> 00:49:28,320
Speaker 1: So now let's talk about that. The United States provides UM.

961
00:49:28,400 --> 00:49:31,040
Speaker 1: We have we have treaties with Japan, we have treaties

962
00:49:31,040 --> 00:49:34,200
Speaker 1: with NATO. We prove work with South Korea to protect

963
00:49:34,239 --> 00:49:37,120
Speaker 1: against North Korea. We work with Japan against the rest

964
00:49:37,120 --> 00:49:42,719
Speaker 1: of Asia. All along um, Western Europe. We promised to

965
00:49:42,760 --> 00:49:46,440
Speaker 1: provide a bulwark against Russia and what used to be

966
00:49:46,560 --> 00:49:50,920
Speaker 1: communist Eastern Europe. Are you suggesting that that's going to

967
00:49:51,040 --> 00:49:53,719
Speaker 1: go away in the United States? Are gonna there? So?

968
00:49:53,800 --> 00:49:55,680
Speaker 1: It seems so. I mean, you know, that's what the

969
00:49:55,680 --> 00:49:57,960
Speaker 1: Trump presidency is partly about. Again, we don't know the

970
00:49:57,960 --> 00:49:59,920
Speaker 1: details of the Trump presidency. We don't know in a

971
00:50:00,120 --> 00:50:02,120
Speaker 1: how exactly is going to govern, but it seems that's

972
00:50:02,120 --> 00:50:05,560
Speaker 1: the trend, and some countries are already acting as if

973
00:50:05,560 --> 00:50:08,799
Speaker 1: that's the trend. Really, yeah, because defense spending in many

974
00:50:08,840 --> 00:50:10,879
Speaker 1: parts of the world is going up. If you look

975
00:50:10,920 --> 00:50:13,960
Speaker 1: at it now, right, and whether it's a South where, where,

976
00:50:13,960 --> 00:50:15,719
Speaker 1: where do you see defense spending going Well? I think

977
00:50:15,719 --> 00:50:17,680
Speaker 1: that like you see it in parts of Asia, parts

978
00:50:17,760 --> 00:50:20,799
Speaker 1: of the Middle East, like you see defense spending is

979
00:50:20,840 --> 00:50:24,000
Speaker 1: now is not going up over the last few years.

980
00:50:24,560 --> 00:50:28,879
Speaker 1: That's interesting because the number of conflicts has been going

981
00:50:29,000 --> 00:50:32,520
Speaker 1: down steadily for decades. Yes, I wonder if that's gonna

982
00:50:32,600 --> 00:50:35,839
Speaker 1: Do you see that changing is? Yeah, because I think

983
00:50:35,880 --> 00:50:38,960
Speaker 1: that if you again look back at history and you

984
00:50:38,960 --> 00:50:44,000
Speaker 1: look at what deglobalization brings it, when nations tend to

985
00:50:44,040 --> 00:50:46,799
Speaker 1: trade less with each other, the potential for conflict does

986
00:50:46,840 --> 00:50:49,200
Speaker 1: go up. Nations turn more inwards. So I do feel

987
00:50:49,239 --> 00:50:52,680
Speaker 1: that now this is stuff which is very hard to model,

988
00:50:53,120 --> 00:50:56,239
Speaker 1: but it's a risk worth keeping in mind that that's

989
00:50:56,280 --> 00:51:00,520
Speaker 1: the trend. So what do you think is the net

990
00:51:01,000 --> 00:51:04,080
Speaker 1: under the radar country to to sort of burst out,

991
00:51:04,400 --> 00:51:08,160
Speaker 1: to become a breakout nation. Well, I think, you know,

992
00:51:08,280 --> 00:51:10,880
Speaker 1: like in terms of in today's era, it's much more difficult.

993
00:51:10,960 --> 00:51:13,200
Speaker 1: But if you ask me, you know one question that

994
00:51:13,239 --> 00:51:15,320
Speaker 1: a lot of people ask me, and it's somewhat related

995
00:51:15,360 --> 00:51:18,440
Speaker 1: to yours, that which region do I think which emerging

996
00:51:18,480 --> 00:51:22,280
Speaker 1: region do I think could graduate to becoming a developed region?

997
00:51:23,200 --> 00:51:25,960
Speaker 1: Very high heart transition to me, right, because today that

998
00:51:26,000 --> 00:51:28,680
Speaker 1: about what was the last country that actually made that transition?

999
00:51:28,719 --> 00:51:31,000
Speaker 1: Well you can argue that something like greased it for

1000
00:51:31,000 --> 00:51:34,360
Speaker 1: a while then fell back. You can argue countries like

1001
00:51:34,440 --> 00:51:37,400
Speaker 1: Israel have have done that. Countries like Korea Taiwan or

1002
00:51:37,440 --> 00:51:41,480
Speaker 1: on the border. Uh, those last three certainly are are

1003
00:51:41,520 --> 00:51:44,600
Speaker 1: are fairly incredible example exactly. So I think that those

1004
00:51:44,640 --> 00:51:47,080
Speaker 1: are If you ask me the next batch, I would say,

1005
00:51:47,080 --> 00:51:51,600
Speaker 1: it's possibly the Eastern European countries really yeah, because check

1006
00:51:51,760 --> 00:51:55,719
Speaker 1: is also Romanias much further behind, but you know, Slovakia.

1007
00:51:56,280 --> 00:51:58,520
Speaker 1: So so I think that these are the countries which

1008
00:51:58,560 --> 00:52:01,520
Speaker 1: have the best potential for making it to the next level.

1009
00:52:01,560 --> 00:52:04,880
Speaker 1: So why what what makes those countries so special and

1010
00:52:05,360 --> 00:52:09,040
Speaker 1: closer to being a developed country than than their peers

1011
00:52:09,040 --> 00:52:11,480
Speaker 1: and neighbors. Yeah, I think that one is in terms

1012
00:52:11,520 --> 00:52:14,000
Speaker 1: of that like the kind of economic policies they follow,

1013
00:52:14,080 --> 00:52:17,560
Speaker 1: which is that much more investment friendly, and because they're

1014
00:52:17,600 --> 00:52:20,000
Speaker 1: close to Europe on how to get integrated with Europe,

1015
00:52:20,040 --> 00:52:23,440
Speaker 1: so they have an aspiration to catch up with Europe.

1016
00:52:23,480 --> 00:52:27,000
Speaker 1: So in terms of you know, the convergence aspiration, and

1017
00:52:27,080 --> 00:52:30,000
Speaker 1: also the fact that I find that they've focused a

1018
00:52:30,080 --> 00:52:32,799
Speaker 1: lot on getting their institutions correct, which is that you know,

1019
00:52:32,840 --> 00:52:36,000
Speaker 1: of very important of getting the same sort of metrics

1020
00:52:36,080 --> 00:52:41,120
Speaker 1: like central bank independence, of of having very strict inflation targets,

1021
00:52:41,160 --> 00:52:47,000
Speaker 1: of not doing uh too much ah excessive government spending,

1022
00:52:47,800 --> 00:52:52,000
Speaker 1: m keeping the deficits under control. So there's basic economic

1023
00:52:52,120 --> 00:52:56,040
Speaker 1: orthodoxy that these countries are following and not doing all

1024
00:52:56,040 --> 00:52:58,600
Speaker 1: the bad things also, which is that they've kept the

1025
00:52:58,640 --> 00:53:02,359
Speaker 1: currencies to be fairly compared ditive, not joined the Euro fully.

1026
00:53:02,400 --> 00:53:04,440
Speaker 1: So they're sort of in that sweet spot, which that

1027
00:53:04,480 --> 00:53:07,239
Speaker 1: they're not part of the Euro currency area, but they're

1028
00:53:07,280 --> 00:53:09,080
Speaker 1: part of the EU area, so they benefit from the

1029
00:53:09,080 --> 00:53:13,080
Speaker 1: trade linkages but don't get locked into having a currency

1030
00:53:13,160 --> 00:53:15,759
Speaker 1: that becomes uncompetitive and leads to all the problems that

1031
00:53:15,800 --> 00:53:19,200
Speaker 1: we saw in Southern Europe by adopting a common currency.

1032
00:53:19,280 --> 00:53:21,400
Speaker 1: You know, we have a friend who is an art

1033
00:53:21,440 --> 00:53:25,320
Speaker 1: director at Pepsi and and does a lot of their

1034
00:53:25,360 --> 00:53:30,880
Speaker 1: their designed for various soda cans and packaging, and and

1035
00:53:30,960 --> 00:53:33,799
Speaker 1: i was looking at some of her portfolios and I'm like, oh,

1036
00:53:33,800 --> 00:53:36,360
Speaker 1: this is really interesting, and she goes this this and

1037
00:53:36,440 --> 00:53:41,120
Speaker 1: this Slovakia, this this, and this Eastern Europe. What do

1038
00:53:41,120 --> 00:53:44,040
Speaker 1: you mean. Oh, they have great designers and computer people,

1039
00:53:44,520 --> 00:53:46,759
Speaker 1: and they work for a tenth of what Americans do,

1040
00:53:46,960 --> 00:53:51,319
Speaker 1: and the booming, booming industry there, so very competitive in

1041
00:53:51,400 --> 00:53:54,960
Speaker 1: terms of the exchange rate and their workforce. The labor

1042
00:53:55,000 --> 00:53:57,839
Speaker 1: costs are relatively low, so I think that these are

1043
00:53:57,880 --> 00:54:02,120
Speaker 1: all good factors for these countries. Quite quite fascinating. My

1044
00:54:02,200 --> 00:54:06,200
Speaker 1: last question before I get to my standard questions you

1045
00:54:06,360 --> 00:54:09,759
Speaker 1: reference in I think it was the earlier book the

1046
00:54:10,400 --> 00:54:14,960
Speaker 1: role of Billionaires in a country. So what do the

1047
00:54:15,040 --> 00:54:20,319
Speaker 1: number of billionaires mean to a country that's development? It's

1048
00:54:20,880 --> 00:54:22,760
Speaker 1: then my current book. You know, one of my rules

1049
00:54:22,760 --> 00:54:24,960
Speaker 1: of the ten rules I speak about in So let's

1050
00:54:25,080 --> 00:54:27,359
Speaker 1: let's go over those ten rules then, because I wanted

1051
00:54:27,400 --> 00:54:30,560
Speaker 1: to get to that, and I'll hopefully we won't run

1052
00:54:30,760 --> 00:54:34,719
Speaker 1: too late, but quickly. Let's let's let's review the ten rules. Right. So,

1053
00:54:34,800 --> 00:54:37,600
Speaker 1: my first rule has to do with demographics, that people matter,

1054
00:54:37,880 --> 00:54:40,960
Speaker 1: which we talked about the second rule of the circle

1055
00:54:41,000 --> 00:54:44,200
Speaker 1: of life. That's how how politics matters. That countries which

1056
00:54:44,200 --> 00:54:47,160
Speaker 1: elect new leaders and typically have their back to the

1057
00:54:47,239 --> 00:54:52,400
Speaker 1: wall are the best sort of conditions for economic reforms

1058
00:54:52,400 --> 00:54:55,160
Speaker 1: to take place in those countries. My third rule has

1059
00:54:55,200 --> 00:54:57,560
Speaker 1: to do with the involvement of the state, which is

1060
00:54:57,560 --> 00:55:00,200
Speaker 1: that typically if you have a very large, intrusive eight

1061
00:55:00,280 --> 00:55:03,640
Speaker 1: that chokes economic growth. Yeah, so like you need the

1062
00:55:03,640 --> 00:55:08,160
Speaker 1: state to be sort of efficient and right sized. Uh.

1063
00:55:08,200 --> 00:55:10,440
Speaker 1: Then I speak about the good and bad billionaires. The

1064
00:55:10,480 --> 00:55:13,160
Speaker 1: fourth rule and this is a new introduction for me

1065
00:55:13,200 --> 00:55:16,000
Speaker 1: because a decade ago I would not have had this rule.

1066
00:55:16,120 --> 00:55:19,160
Speaker 1: Why have I introduced this rule because income in equality

1067
00:55:19,200 --> 00:55:22,040
Speaker 1: has become such a big factor across the world. That's

1068
00:55:22,040 --> 00:55:24,040
Speaker 1: a question and then gets and I'm glad you're bringing

1069
00:55:24,400 --> 00:55:26,520
Speaker 1: So in terms of income, in equality is factor. And

1070
00:55:26,520 --> 00:55:29,359
Speaker 1: we know that if a country becomes too unequal, that

1071
00:55:29,440 --> 00:55:32,319
Speaker 1: leads to problems for economic growth in that country. So

1072
00:55:32,400 --> 00:55:34,480
Speaker 1: the Good and Bad Billionaires is a very live way

1073
00:55:34,480 --> 00:55:39,239
Speaker 1: of gauging whether inequality in a country has become too

1074
00:55:39,360 --> 00:55:42,400
Speaker 1: much of a factor and possibly goes against that country's

1075
00:55:42,440 --> 00:55:44,680
Speaker 1: cultural wealth creation. So you look at the number of

1076
00:55:44,719 --> 00:55:46,720
Speaker 1: good and bad billionaires. If you have too many billionaires

1077
00:55:46,719 --> 00:55:48,960
Speaker 1: in a country, or you have if you have too

1078
00:55:48,960 --> 00:55:52,399
Speaker 1: many billionaires coming from industries perceived as being corrupt, which

1079
00:55:52,480 --> 00:55:56,360
Speaker 1: is real estate, mining, oil and gas, or if you

1080
00:55:56,400 --> 00:55:59,319
Speaker 1: have too many billionaires who simply inherit their wealth rather

1081
00:55:59,360 --> 00:56:01,839
Speaker 1: than make it on their own. Those are conditions which

1082
00:56:01,880 --> 00:56:05,080
Speaker 1: typically lead the population of a country to be against

1083
00:56:05,080 --> 00:56:08,080
Speaker 1: the process of well creation. The flip side, and you

1084
00:56:08,120 --> 00:56:09,840
Speaker 1: know this is where the United States is still okay.

1085
00:56:10,120 --> 00:56:15,840
Speaker 1: If you have lots of billionaires coming from innovative industrieslogy, manufacturing, pharmaceuticals.

1086
00:56:15,880 --> 00:56:19,560
Speaker 1: Those people are respected answers financing well, finance I think

1087
00:56:19,600 --> 00:56:23,359
Speaker 1: is a border line little I'd say that I'm not surprised. Yeah,

1088
00:56:23,400 --> 00:56:25,279
Speaker 1: if you have too many billionaires coming from finance, I

1089
00:56:25,320 --> 00:56:27,960
Speaker 1: don't think that's a good ning for a country. And uh,

1090
00:56:29,000 --> 00:56:31,080
Speaker 1: if a lot of the world is mainly inherited, like

1091
00:56:31,120 --> 00:56:32,799
Speaker 1: tends to be the case in place like Korea and

1092
00:56:32,800 --> 00:56:35,279
Speaker 1: other places, that's also not good for a country. But

1093
00:56:35,320 --> 00:56:37,040
Speaker 1: the place where the United States looks a bit weak

1094
00:56:37,080 --> 00:56:39,120
Speaker 1: because the number of billionaires as a share of the

1095
00:56:39,200 --> 00:56:42,319
Speaker 1: economy is very very large out here, So you ends

1096
00:56:42,400 --> 00:56:44,359
Speaker 1: up with a lot of income inequality exactly. But if

1097
00:56:44,360 --> 00:56:47,040
Speaker 1: you take all these things together, So that's the first five,

1098
00:56:47,120 --> 00:56:48,799
Speaker 1: give me the back five. Right, So in terms of

1099
00:56:48,800 --> 00:56:51,360
Speaker 1: then I talked about geography, right, in terms of that

1100
00:56:51,520 --> 00:56:54,719
Speaker 1: sweet spot and trade spots that we spoke about. Then

1101
00:56:54,760 --> 00:56:59,760
Speaker 1: I speak about uhctories first, Yeah, that that typically countries

1102
00:56:59,760 --> 00:57:03,520
Speaker 1: which are strong and manufacturing and investment don do much

1103
00:57:03,560 --> 00:57:06,320
Speaker 1: better than countries which are strong and commodities and consumption.

1104
00:57:06,360 --> 00:57:09,440
Speaker 1: We certainly have seen that all around the world. Last, yes,

1105
00:57:09,680 --> 00:57:12,440
Speaker 1: you know, like you've seen that these commodity ridented economies

1106
00:57:12,480 --> 00:57:15,000
Speaker 1: boom and bust very frequently. People have been calling it

1107
00:57:15,080 --> 00:57:18,160
Speaker 1: the curse of oil or the curse of commodities. So

1108
00:57:18,200 --> 00:57:21,000
Speaker 1: we've seen that overtime, countries which tend to focus more

1109
00:57:21,000 --> 00:57:24,760
Speaker 1: on manufacturing exports too much better than countries which export commodities.

1110
00:57:25,400 --> 00:57:28,560
Speaker 1: Then I speak about currency, that your exchange rate needs

1111
00:57:28,560 --> 00:57:31,320
Speaker 1: to be very competitive to be able to grow that

1112
00:57:31,360 --> 00:57:34,400
Speaker 1: if we have a very overvalued currency and and you

1113
00:57:34,440 --> 00:57:36,959
Speaker 1: have like that's not a good thing. Then I speak

1114
00:57:37,000 --> 00:57:39,760
Speaker 1: about inflation on how low inflation is the bedrock for

1115
00:57:39,800 --> 00:57:43,120
Speaker 1: financial stability, but we also need to sort of focus

1116
00:57:43,200 --> 00:57:45,360
Speaker 1: much more on asset price inflation as well. Looking at

1117
00:57:45,400 --> 00:57:47,960
Speaker 1: just consumer price inflation is not enough. We need to

1118
00:57:48,000 --> 00:57:50,520
Speaker 1: broaden the scope. That you know, if you get housing

1119
00:57:50,520 --> 00:57:54,000
Speaker 1: booms financed by debt, that's a real problem. My favorite rule,

1120
00:57:54,040 --> 00:57:55,640
Speaker 1: as I said, is the Kiss of debt, because the

1121
00:57:55,640 --> 00:57:58,640
Speaker 1: academic work that I've done on it has the maximum

1122
00:57:58,680 --> 00:58:01,880
Speaker 1: backing and very powerful. And the last rule is is

1123
00:58:02,240 --> 00:58:05,320
Speaker 1: maybe a bit of music, but really important is the

1124
00:58:05,360 --> 00:58:08,120
Speaker 1: contrarian rule, which is that if a country begins to

1125
00:58:08,160 --> 00:58:10,840
Speaker 1: appear on the cover stories of a magazine too often

1126
00:58:11,760 --> 00:58:14,760
Speaker 1: in a positive way that is usually not good for

1127
00:58:14,800 --> 00:58:17,400
Speaker 1: that country, because it tells you that the trend is

1128
00:58:17,440 --> 00:58:20,040
Speaker 1: maturing and that the leaders of the other country getting

1129
00:58:20,040 --> 00:58:22,760
Speaker 1: too complacent. You call it the hype watch. The hype

1130
00:58:22,760 --> 00:58:26,080
Speaker 1: watch because, as I said, I began my career as

1131
00:58:26,080 --> 00:58:28,360
Speaker 1: a writer and a term I often heard about with

1132
00:58:28,440 --> 00:58:31,200
Speaker 1: the curse of the cover story, right, which that's something

1133
00:58:31,200 --> 00:58:32,960
Speaker 1: that makes it to the cover of a of a

1134
00:58:33,000 --> 00:58:35,800
Speaker 1: popular magazine, that trend tends to come to an end,

1135
00:58:35,840 --> 00:58:38,560
Speaker 1: is what journalists speak about. But I've done work here

1136
00:58:38,600 --> 00:58:41,040
Speaker 1: to back that up. And what my work very briefly

1137
00:58:41,080 --> 00:58:43,160
Speaker 1: shows is that if a country makes it to the

1138
00:58:43,200 --> 00:58:46,479
Speaker 1: cover of Time magazine in a positive way, and two

1139
00:58:46,520 --> 00:58:48,520
Speaker 1: thirds of that time, that country does poorly in the

1140
00:58:48,560 --> 00:58:50,760
Speaker 1: next five years. On the other hand, of a country

1141
00:58:50,760 --> 00:58:53,600
Speaker 1: makes the cover of Time magazine in a negative way,

1142
00:58:53,960 --> 00:58:57,280
Speaker 1: then two thirds of that time that the time that

1143
00:58:57,320 --> 00:58:59,960
Speaker 1: country does well in the next five years. Because, as

1144
00:59:00,320 --> 00:59:02,120
Speaker 1: it goes back to my original rule of the circle

1145
00:59:02,160 --> 00:59:04,920
Speaker 1: of life, that countries typically reform only when they have

1146
00:59:04,960 --> 00:59:08,440
Speaker 1: their back to the wall, and countries get complacent once

1147
00:59:08,760 --> 00:59:12,200
Speaker 1: they're already booming, and magazine editors feel embolding to put

1148
00:59:12,200 --> 00:59:14,840
Speaker 1: a country on the cover in a positive way. Once

1149
00:59:14,840 --> 00:59:17,680
Speaker 1: a boom is a parent. The old joke is once

1150
00:59:17,840 --> 00:59:21,240
Speaker 1: uh it makes it to the editorial staff of Time magazine,

1151
00:59:21,600 --> 00:59:23,560
Speaker 1: who's left to come in and buy that? That's the

1152
00:59:23,680 --> 00:59:29,000
Speaker 1: end of So those ten are fascinating In the last

1153
00:59:29,680 --> 00:59:32,040
Speaker 1: uh ten twelve minutes I have you. Let's let's go

1154
00:59:32,160 --> 00:59:36,760
Speaker 1: through um my standard questions uh to learn a little

1155
00:59:36,760 --> 00:59:40,080
Speaker 1: more about you if we can. Um let's talk about

1156
00:59:40,120 --> 00:59:42,760
Speaker 1: some of your We discussed your background. Let's talk about

1157
00:59:42,800 --> 00:59:47,280
Speaker 1: your early mentors. Who who is influential in in helping

1158
00:59:47,320 --> 00:59:49,360
Speaker 1: your career along? Well, I think that you know that

1159
00:59:49,480 --> 00:59:51,800
Speaker 1: I mean like in terms of like a combination of

1160
00:59:52,600 --> 00:59:56,360
Speaker 1: people out there. The firm that I uh that I

1161
00:59:56,480 --> 00:59:59,479
Speaker 1: joined at at Morgan Standy for example twenty years ago,

1162
00:59:59,760 --> 01:00:02,880
Speaker 1: where led by a very interesting character called Barton Biggs,

1163
01:00:04,080 --> 01:00:07,120
Speaker 1: so like so like he he really sort of uh

1164
01:00:08,120 --> 01:00:10,880
Speaker 1: showed me this combination of investing in writing could be

1165
01:00:10,920 --> 01:00:14,400
Speaker 1: such fun. So he's definitely someone I think that who

1166
01:00:14,480 --> 01:00:17,480
Speaker 1: was in like an inspiration for many people out here.

1167
01:00:18,120 --> 01:00:21,240
Speaker 1: But you know, from an investment standpoint, I'd say that,

1168
01:00:20,880 --> 01:00:23,560
Speaker 1: well that I was very fortunate that when that the

1169
01:00:23,640 --> 01:00:26,840
Speaker 1: person I first worked with back in Asia with somebody

1170
01:00:26,840 --> 01:00:28,720
Speaker 1: who showed me that you really need a very good

1171
01:00:28,760 --> 01:00:31,120
Speaker 1: temperament for investing. And I think that's something which we

1172
01:00:31,200 --> 01:00:36,080
Speaker 1: all tend to possibly underestimate. Temperament for investing, which is

1173
01:00:36,120 --> 01:00:38,680
Speaker 1: there some more details on what do you mean by that? Yeah,

1174
01:00:38,680 --> 01:00:41,120
Speaker 1: because I think that so many people. I mean, one

1175
01:00:41,120 --> 01:00:43,400
Speaker 1: of the big problems we have in our industry is

1176
01:00:43,480 --> 01:00:46,919
Speaker 1: people sort of you know, like too wedded to their

1177
01:00:46,960 --> 01:00:51,360
Speaker 1: screens and two weady to daily price movements and often

1178
01:00:51,440 --> 01:00:55,680
Speaker 1: chasing their tail and um, often with very little ability

1179
01:00:55,760 --> 01:00:58,800
Speaker 1: to withstand pain in the short term, and and being

1180
01:00:58,800 --> 01:01:01,760
Speaker 1: too momentum driven. Right. So I think that what one

1181
01:01:01,800 --> 01:01:06,040
Speaker 1: of my first UH people that I worked with really

1182
01:01:06,040 --> 01:01:08,240
Speaker 1: taught me was that how do you have a good

1183
01:01:08,240 --> 01:01:10,920
Speaker 1: temperament for investing? How can you take the long view

1184
01:01:11,440 --> 01:01:14,400
Speaker 1: and and have the patience to sit through uh the

1185
01:01:15,000 --> 01:01:18,360
Speaker 1: uh like the long view. So I think that temperament

1186
01:01:18,400 --> 01:01:23,120
Speaker 1: for investing is something is very important. That's interesting. Let's

1187
01:01:23,120 --> 01:01:26,320
Speaker 1: talk about investors who and this keeps buzzing and I

1188
01:01:26,400 --> 01:01:28,720
Speaker 1: keep shutting it off and I can't get it to stop.

1189
01:01:29,080 --> 01:01:33,280
Speaker 1: That's that's what I've been doing here. Um, what investors

1190
01:01:33,280 --> 01:01:37,720
Speaker 1: have influenced your approach to investing? Who's affected the way

1191
01:01:37,760 --> 01:01:41,320
Speaker 1: you think about putting money to work in emerging markets.

1192
01:01:41,440 --> 01:01:43,000
Speaker 1: But as I said that I learned you know that,

1193
01:01:43,040 --> 01:01:45,160
Speaker 1: you know, the people that I initially worked with, including

1194
01:01:45,200 --> 01:01:47,680
Speaker 1: Barton and some of his colleagues, you know, like obviously

1195
01:01:48,080 --> 01:01:51,959
Speaker 1: had a big influence on that. Uh. But I also

1196
01:01:52,040 --> 01:01:55,400
Speaker 1: feel that, like like some of the macro style of investing,

1197
01:01:55,480 --> 01:01:57,360
Speaker 1: you know, like the people that I have, you know

1198
01:01:57,360 --> 01:01:59,640
Speaker 1: that we all grew up admiring with the likes of

1199
01:01:59,680 --> 01:02:02,320
Speaker 1: the job sorry is Julian Robertson's of the world, and

1200
01:02:02,920 --> 01:02:04,720
Speaker 1: I was fortunate to interact with some of them at

1201
01:02:04,920 --> 01:02:07,360
Speaker 1: a very early stage of my career. So I'd say

1202
01:02:07,360 --> 01:02:10,440
Speaker 1: that those type of people who you know, the classic

1203
01:02:10,640 --> 01:02:14,919
Speaker 1: big edge fund investors of the nine nineties, uh, look

1204
01:02:15,400 --> 01:02:18,040
Speaker 1: like such as these characters, I'd say, you know, we're

1205
01:02:19,080 --> 01:02:21,960
Speaker 1: very influential in the way that I think that I've

1206
01:02:22,000 --> 01:02:25,800
Speaker 1: grown up. So you've written two books, You've published everywhere

1207
01:02:25,840 --> 01:02:28,600
Speaker 1: from the wall, strettourn over the f T, you know,

1208
01:02:28,720 --> 01:02:32,400
Speaker 1: all around. Let's talk about who you read? What what

1209
01:02:32,480 --> 01:02:36,200
Speaker 1: books have you enjoyed, be them be they fiction or nonfiction,

1210
01:02:36,320 --> 01:02:38,880
Speaker 1: market related or not. Well, I tend to read a

1211
01:02:38,880 --> 01:02:42,240
Speaker 1: lot of biographies, because I really sort of find those fascinating,

1212
01:02:42,320 --> 01:02:44,880
Speaker 1: especially which you know, take me back into a different

1213
01:02:45,480 --> 01:02:47,720
Speaker 1: period of history. Give us a few. For example, this

1214
01:02:47,800 --> 01:02:50,600
Speaker 1: year I read, you know, like John Mitchum's book on

1215
01:02:50,640 --> 01:02:54,240
Speaker 1: George Bush, the first right, which is George H. W. Bush.

1216
01:02:54,240 --> 01:02:57,360
Speaker 1: I found that a very interesting book in terms of

1217
01:02:58,280 --> 01:03:00,480
Speaker 1: it's a fascinating tale of how some one can win

1218
01:03:00,520 --> 01:03:02,680
Speaker 1: a war and lose an election and sort of you know,

1219
01:03:02,720 --> 01:03:04,760
Speaker 1: to take us into the mind and it's such a

1220
01:03:04,760 --> 01:03:09,960
Speaker 1: different error. Also that you a total a totally different

1221
01:03:10,120 --> 01:03:12,680
Speaker 1: Republican from a different era. Complain what we see too

1222
01:03:12,960 --> 01:03:15,400
Speaker 1: is different. Everything, everything is different. So I think that

1223
01:03:15,480 --> 01:03:18,320
Speaker 1: was a fascinating book to read. I mean, then I

1224
01:03:18,320 --> 01:03:22,000
Speaker 1: think Charles More's biography on Margaret Thatcher, Andrew Roberts book

1225
01:03:22,040 --> 01:03:24,640
Speaker 1: on Napoleon. These are like some of the biographies that

1226
01:03:24,680 --> 01:03:28,520
Speaker 1: I've really enjoyed reading in recent in like recent times.

1227
01:03:29,360 --> 01:03:32,360
Speaker 1: Um that In terms of investing, I think that, I mean,

1228
01:03:32,400 --> 01:03:34,160
Speaker 1: I like books which you know, like tell me more

1229
01:03:34,680 --> 01:03:39,840
Speaker 1: about investing behaviors. I think that someone like Nicholas Talib

1230
01:03:39,880 --> 01:03:46,040
Speaker 1: has written some good books on that randomness. And then yeah,

1231
01:03:46,080 --> 01:03:49,040
Speaker 1: like the concept of antifragile was very strong even though

1232
01:03:49,080 --> 01:03:51,480
Speaker 1: that book itself didn't do that well. But the concept

1233
01:03:51,480 --> 01:03:53,680
Speaker 1: of anti fragile I thought was it was like a

1234
01:03:53,760 --> 01:03:55,800
Speaker 1: very strong concept that if you're able to sort of

1235
01:03:56,560 --> 01:03:58,919
Speaker 1: you know, like the old sort of notion about which

1236
01:03:58,920 --> 01:04:00,680
Speaker 1: is sort of showed so well, if you're able to

1237
01:04:01,120 --> 01:04:03,800
Speaker 1: sort of you know, uh, if something can't break you,

1238
01:04:03,920 --> 01:04:06,960
Speaker 1: it makes you stronger. So I think that those are

1239
01:04:06,960 --> 01:04:09,040
Speaker 1: the kind of books which I which I like to

1240
01:04:09,040 --> 01:04:12,440
Speaker 1: read over time. But I'd say that the biographies in

1241
01:04:12,520 --> 01:04:17,840
Speaker 1: particular is my weakness. Um, I'm on my list is

1242
01:04:17,880 --> 01:04:21,880
Speaker 1: The Right Brothers by McColl. Everybody I know who's read

1243
01:04:21,920 --> 01:04:25,200
Speaker 1: it just raves about it. I haven't gotten to it yet,

1244
01:04:25,240 --> 01:04:28,000
Speaker 1: but I think that's gonna be my next next holiday.

1245
01:04:28,200 --> 01:04:32,880
Speaker 1: Um read right, Yeah, absolutely, any other you ever read fiction?

1246
01:04:32,960 --> 01:04:35,880
Speaker 1: Anything else? Unfortunately I don't read fiction. But I'm a

1247
01:04:35,960 --> 01:04:40,320
Speaker 1: huge movie fan. And yeah, and I find I particularly

1248
01:04:40,360 --> 01:04:44,120
Speaker 1: like watching international cinema. Uh. And I find that watching

1249
01:04:44,120 --> 01:04:46,720
Speaker 1: international cinema is a great way of learning about the

1250
01:04:46,760 --> 01:04:50,760
Speaker 1: social fabric of another country that's very interesting, whether it's European, Iranian,

1251
01:04:50,920 --> 01:04:54,240
Speaker 1: but there's some great international cinema. And I find that

1252
01:04:54,240 --> 01:04:57,360
Speaker 1: that so like. I don't think ever the week goes

1253
01:04:57,400 --> 01:05:00,320
Speaker 1: by when I don't watch one or two international movies. Really,

1254
01:05:00,520 --> 01:05:07,200
Speaker 1: so this is a quite fascinating coincidence. Your podcast episode

1255
01:05:07,400 --> 01:05:11,880
Speaker 1: follows first Lawrence Levy, who was the CFO of Pixel Right,

1256
01:05:12,600 --> 01:05:18,680
Speaker 1: and then David Tuckman who um took channels like MTV

1257
01:05:18,800 --> 01:05:23,160
Speaker 1: and Nickelodeon and am A, m C and h MGM

1258
01:05:23,200 --> 01:05:27,680
Speaker 1: and turned them into international brands. And he literally took

1259
01:05:28,160 --> 01:05:32,840
Speaker 1: all these various US properties and turned them into you know,

1260
01:05:33,080 --> 01:05:35,720
Speaker 1: I think those channels are now in a hundred and

1261
01:05:35,720 --> 01:05:39,400
Speaker 1: forty countries. Um. Yeah, No, it's really just an unusual,

1262
01:05:39,760 --> 01:05:45,280
Speaker 1: interesting coincidence. How do you find these international films to watch?

1263
01:05:45,360 --> 01:05:47,760
Speaker 1: Is it Netflix or no? I mean, like I like

1264
01:05:47,840 --> 01:05:49,760
Speaker 1: doing it the old classical way, which is of going

1265
01:05:49,800 --> 01:05:52,840
Speaker 1: into a theater, locking yourself in, you know, for two hours,

1266
01:05:52,960 --> 01:05:57,160
Speaker 1: without without any access to technology, and like seeing it

1267
01:05:57,240 --> 01:05:58,720
Speaker 1: and the other passion. And you can do that in

1268
01:05:58,760 --> 01:06:01,080
Speaker 1: New York. There's plenty of into national you know, like

1269
01:06:01,120 --> 01:06:03,680
Speaker 1: in fact exactly so. And also like some of the

1270
01:06:03,680 --> 01:06:06,080
Speaker 1: film festivals, like I've watched I was the New York

1271
01:06:06,120 --> 01:06:08,240
Speaker 1: Film Festival in October. I think I watched a dozen

1272
01:06:08,320 --> 01:06:11,080
Speaker 1: movies playing at Lincoln Center at one of the most

1273
01:06:11,120 --> 01:06:14,240
Speaker 1: you know, spectacular places to watch a movie, the Alice

1274
01:06:14,280 --> 01:06:16,120
Speaker 1: Tully Hall I find. I mean, I just love sitting

1275
01:06:16,160 --> 01:06:19,840
Speaker 1: in or the water read theater, so, um, I really

1276
01:06:20,160 --> 01:06:22,280
Speaker 1: like doing that, and going to film festivals. I think

1277
01:06:22,280 --> 01:06:24,360
Speaker 1: it's a great way of of doing that. So, like

1278
01:06:24,640 --> 01:06:26,760
Speaker 1: I mean to tell you right earlier this year, I've

1279
01:06:26,800 --> 01:06:30,000
Speaker 1: been to Venice, Can I've been to these so I think,

1280
01:06:30,040 --> 01:06:32,600
Speaker 1: you know, like I find it fascinated with film festivals.

1281
01:06:32,640 --> 01:06:35,440
Speaker 1: And in in New York, of course you have two

1282
01:06:35,480 --> 01:06:38,840
Speaker 1: film festivals which are great. The New York Film Festival

1283
01:06:38,840 --> 01:06:42,520
Speaker 1: I think is like absolutely brilliant, and then at a

1284
01:06:42,560 --> 01:06:47,640
Speaker 1: smaller level we have the Tribeca in April. Yeah, so

1285
01:06:47,680 --> 01:06:51,400
Speaker 1: I'd think that watching going to film festivals, watching some

1286
01:06:51,480 --> 01:06:54,920
Speaker 1: international cinema, learning about the social fabric of another country

1287
01:06:55,120 --> 01:06:58,800
Speaker 1: through that. And of course European cinema is just lifestyle voyeurism, right,

1288
01:06:58,800 --> 01:07:00,800
Speaker 1: I mean you could just watch any europe Insured and

1289
01:07:00,840 --> 01:07:03,360
Speaker 1: the setting is so spectacular, and you know, like the

1290
01:07:03,360 --> 01:07:06,360
Speaker 1: mannerisms are as such which as you know, where you know,

1291
01:07:06,480 --> 01:07:10,040
Speaker 1: which are captured so well on camera that it's a

1292
01:07:10,040 --> 01:07:13,920
Speaker 1: great fund to what such movies that's really really interesting. Um.

1293
01:07:14,000 --> 01:07:16,240
Speaker 1: So in the last few minutes I have you for

1294
01:07:16,520 --> 01:07:21,560
Speaker 1: let me ask you what has changed about the emerging markets, Um,

1295
01:07:21,880 --> 01:07:26,000
Speaker 1: since you began following them, you know, twenty years ago. Well,

1296
01:07:26,040 --> 01:07:28,960
Speaker 1: they become much more sort of structured now. I mean

1297
01:07:28,960 --> 01:07:31,000
Speaker 1: when I started twenty years ago, it was a bit

1298
01:07:31,040 --> 01:07:34,320
Speaker 1: of a cowboy land, which more frontier than imagining exactly,

1299
01:07:34,360 --> 01:07:37,840
Speaker 1: you know, like the rules weren't entirely cleared. How you

1300
01:07:37,920 --> 01:07:41,520
Speaker 1: got research was much more unstructured, and uh, you know,

1301
01:07:41,640 --> 01:07:43,960
Speaker 1: like and then you had all sorts of corporate governance

1302
01:07:43,960 --> 01:07:47,040
Speaker 1: issues in these markets. So I think it's that's become

1303
01:07:47,080 --> 01:07:51,440
Speaker 1: a lot better now over time, and the integration is

1304
01:07:51,520 --> 01:07:55,040
Speaker 1: much more real now. So I'd say that there's been

1305
01:07:55,080 --> 01:07:57,280
Speaker 1: a big improvement in terms of as far as emerging

1306
01:07:57,280 --> 01:07:59,920
Speaker 1: markets are concerned. But I still find traveling is very useful.

1307
01:08:01,000 --> 01:08:03,520
Speaker 1: But the big change, I'd say is the fact that

1308
01:08:03,600 --> 01:08:05,840
Speaker 1: it's a lot more structured now compared to the cowboy

1309
01:08:05,920 --> 01:08:08,560
Speaker 1: days of twenty five years ago when if I started

1310
01:08:08,560 --> 01:08:12,440
Speaker 1: looking at these countries and actually you answered my, uh

1311
01:08:12,560 --> 01:08:13,880
Speaker 1: the question I was gonna ask you, what do you

1312
01:08:13,880 --> 01:08:18,040
Speaker 1: do to relax outside of the office biographies and film festivals. Um,

1313
01:08:18,120 --> 01:08:21,960
Speaker 1: let's jump to the last two questions. So you have

1314
01:08:22,040 --> 01:08:24,320
Speaker 1: to work with a lot of people right out of school,

1315
01:08:24,400 --> 01:08:27,920
Speaker 1: young people at Morgan Stanley. What sort of advice do

1316
01:08:28,000 --> 01:08:30,760
Speaker 1: you give to millennials or someone at the start of

1317
01:08:30,800 --> 01:08:38,520
Speaker 1: their career who say, Hey, I'm interested in emerging market uh, investing? Um,

1318
01:08:38,560 --> 01:08:39,920
Speaker 1: you know, like I'm a bit st if. I find

1319
01:08:39,920 --> 01:08:42,400
Speaker 1: it a bit presumptuous to give advice to people, because

1320
01:08:42,439 --> 01:08:43,960
Speaker 1: I find that each one to their own. I mean

1321
01:08:43,960 --> 01:08:46,120
Speaker 1: I never followed anyone's advice while growing up, to be

1322
01:08:46,200 --> 01:08:49,759
Speaker 1: honest with you, because I was at a very young age,

1323
01:08:49,600 --> 01:08:52,519
Speaker 1: I got very interested in writing and investing and just

1324
01:08:52,560 --> 01:08:56,439
Speaker 1: followed my passion. And sometimes at work sometimes that doesn't work.

1325
01:08:56,479 --> 01:08:58,840
Speaker 1: And uh, I was about to come here in the

1326
01:08:58,880 --> 01:09:01,679
Speaker 1: U s to do my PhD. And someone from Morgan

1327
01:09:01,760 --> 01:09:04,880
Speaker 1: Stanley who liked my work while hiring me, basically told

1328
01:09:04,880 --> 01:09:06,040
Speaker 1: me that you want to study or do you want

1329
01:09:06,080 --> 01:09:07,760
Speaker 1: to make money? I want to make money And I

1330
01:09:07,760 --> 01:09:10,479
Speaker 1: didn't study more, and I think I learned more by

1331
01:09:10,560 --> 01:09:13,720
Speaker 1: sort of working real time. But it works for some,

1332
01:09:13,840 --> 01:09:15,760
Speaker 1: it doesn't work for the others. So I feel it

1333
01:09:15,760 --> 01:09:18,160
Speaker 1: presumptuous to give advice. But I think very important to

1334
01:09:18,160 --> 01:09:20,320
Speaker 1: know that there is no one size fits all formula.

1335
01:09:20,760 --> 01:09:22,840
Speaker 1: There is no manthra of a success that you've got

1336
01:09:22,840 --> 01:09:25,360
Speaker 1: to do this and that will happen. But but you've

1337
01:09:25,360 --> 01:09:26,800
Speaker 1: got to find out who you are and sort of

1338
01:09:26,800 --> 01:09:29,599
Speaker 1: follow that passion. And and for me, my entire sort

1339
01:09:29,600 --> 01:09:32,479
Speaker 1: of thing is that you've got to sort of Um,

1340
01:09:32,560 --> 01:09:35,840
Speaker 1: there's a line that someone told me very early on

1341
01:09:35,880 --> 01:09:38,320
Speaker 1: which I followed to, which is that live life in

1342
01:09:38,439 --> 01:09:41,680
Speaker 1: parallel and not in series. You know, which is that,

1343
01:09:42,080 --> 01:09:44,040
Speaker 1: like so many people at a young age left to plan,

1344
01:09:44,120 --> 01:09:45,920
Speaker 1: I'll do this five years from now, I'll put the

1345
01:09:46,000 --> 01:09:47,960
Speaker 1: soft ten years from now. Hey, if you can do

1346
01:09:48,000 --> 01:09:50,360
Speaker 1: it today, do it right. Who knows what's gonna happen

1347
01:09:50,360 --> 01:09:54,200
Speaker 1: for you. Yeah, so i'd say that, like, at least

1348
01:09:54,240 --> 01:09:56,920
Speaker 1: for happiness, that's important. Now. Whether that's a success formula,

1349
01:09:56,960 --> 01:09:58,960
Speaker 1: I don't know, but I think it makes you happier

1350
01:09:58,960 --> 01:10:01,080
Speaker 1: to live life in parallel it in series. Well, Well,

1351
01:10:01,120 --> 01:10:03,400
Speaker 1: that's very humble of you to say. Who am I

1352
01:10:03,479 --> 01:10:07,720
Speaker 1: to say? You have achieved a certain degree of professional success,

1353
01:10:07,720 --> 01:10:11,599
Speaker 1: which I think certainly is why someone might be asking

1354
01:10:11,600 --> 01:10:14,800
Speaker 1: you for advice. But I like your answer. I think

1355
01:10:14,840 --> 01:10:18,160
Speaker 1: that's a very interesting answer. And our final question, Um,

1356
01:10:18,240 --> 01:10:22,080
Speaker 1: what is it that you know about emerging markets today

1357
01:10:22,120 --> 01:10:25,479
Speaker 1: that you wish you knew twenty years ago? As I

1358
01:10:25,560 --> 01:10:28,880
Speaker 1: said that emerging markets have really evolved a lot over

1359
01:10:29,960 --> 01:10:32,080
Speaker 1: over time. But what I'm really happy with is that

1360
01:10:32,200 --> 01:10:34,479
Speaker 1: at least have come up with now a structure of

1361
01:10:34,520 --> 01:10:37,360
Speaker 1: thinking about them, these pain rules, right, I mean, like

1362
01:10:38,320 --> 01:10:41,120
Speaker 1: because like often what happened when we speak about countries.

1363
01:10:41,160 --> 01:10:42,640
Speaker 1: It's not just true of emerging but even though of

1364
01:10:42,680 --> 01:10:44,960
Speaker 1: the U S or other developed countries, is that we

1365
01:10:45,000 --> 01:10:48,000
Speaker 1: have these unstructured water cooler type conversations, or this country

1366
01:10:48,000 --> 01:10:51,160
Speaker 1: looks good because of this, this country looks bad because

1367
01:10:51,160 --> 01:10:53,280
Speaker 1: I don't like that leader or something like that. I

1368
01:10:53,280 --> 01:10:55,120
Speaker 1: think what I'm really happy about is that at least

1369
01:10:55,120 --> 01:10:56,880
Speaker 1: I've been able to come up with Okay, these are

1370
01:10:56,880 --> 01:10:59,200
Speaker 1: the ten things you should really look at, and this

1371
01:10:59,240 --> 01:11:02,400
Speaker 1: is how you should look so money ball for emerging markets,

1372
01:11:02,400 --> 01:11:05,559
Speaker 1: the way of quantifying what's going on instead of the

1373
01:11:05,640 --> 01:11:08,200
Speaker 1: old myths and heuristics. Yeah, but I'm saying yeah, and

1374
01:11:08,240 --> 01:11:11,120
Speaker 1: like also of eliminating as to what does not matter,

1375
01:11:11,360 --> 01:11:14,080
Speaker 1: Like you know all these myths that education really matters

1376
01:11:14,120 --> 01:11:17,920
Speaker 1: for economic growth. Yeah, but the evidence is very mixed

1377
01:11:17,920 --> 01:11:20,040
Speaker 1: that the time it takes for education to move. The

1378
01:11:20,040 --> 01:11:22,559
Speaker 1: needle for ecnomic growth is much longer than you and

1379
01:11:22,600 --> 01:11:25,519
Speaker 1: I can sort of be here for it's better than not.

1380
01:11:25,600 --> 01:11:28,800
Speaker 1: But you're not gonna wait twenty years, thirty years to

1381
01:11:28,840 --> 01:11:30,280
Speaker 1: have to hang my hat on that. And it's a

1382
01:11:30,320 --> 01:11:32,680
Speaker 1: chicken g story as to which one comes first, is

1383
01:11:32,680 --> 01:11:35,280
Speaker 1: it good education or is it economic success, which then

1384
01:11:35,400 --> 01:11:38,679
Speaker 1: leads to the funding education. I mean for good education.

1385
01:11:38,720 --> 01:11:40,600
Speaker 1: So I'd say that that is what I'd say that

1386
01:11:40,640 --> 01:11:42,880
Speaker 1: I wish i'd known back then, I think, But but

1387
01:11:43,600 --> 01:11:46,040
Speaker 1: that's the process of evolution, which that you just learned

1388
01:11:46,080 --> 01:11:47,920
Speaker 1: these things over time. But the fact that we at

1389
01:11:47,960 --> 01:11:51,160
Speaker 1: least have ten things, and I'm very pleased to share

1390
01:11:51,200 --> 01:11:52,800
Speaker 1: that with the rest of the world so that I

1391
01:11:52,800 --> 01:11:55,480
Speaker 1: can have this debate about how to improve the system

1392
01:11:55,640 --> 01:11:57,519
Speaker 1: is what I feel good about. So if people want

1393
01:11:57,520 --> 01:11:59,760
Speaker 1: to find your work, where's the best place for them

1394
01:11:59,760 --> 01:12:02,000
Speaker 1: to look for you? We we can at least mention

1395
01:12:02,439 --> 01:12:04,760
Speaker 1: the two books break Out Nation and Rise and Full

1396
01:12:04,800 --> 01:12:08,360
Speaker 1: of Nations. I assume most of the writing you do

1397
01:12:08,520 --> 01:12:11,920
Speaker 1: at Morgan Stanley is behind a research firewall. Is that correct?

1398
01:12:12,000 --> 01:12:14,120
Speaker 1: I mean, like I'm on the investing site, so I'm

1399
01:12:14,120 --> 01:12:16,599
Speaker 1: on the investment management site. So I don't write research

1400
01:12:16,680 --> 01:12:19,000
Speaker 1: for external good but what I do write our op

1401
01:12:19,120 --> 01:12:22,640
Speaker 1: eds very frequently, so Wall Street Journal ft FT, New

1402
01:12:22,720 --> 01:12:25,880
Speaker 1: York Times UH and foreign affairs are typically couldn't get

1403
01:12:25,920 --> 01:12:30,080
Speaker 1: into any good publication. But you're slumming it. So i'd

1404
01:12:30,080 --> 01:12:33,280
Speaker 1: say that you know like that unfortunately to write for

1405
01:12:33,320 --> 01:12:37,360
Speaker 1: these uh publications. Okay, so you're very so between Google

1406
01:12:37,800 --> 01:12:41,639
Speaker 1: and Amazon, you're very findable, I think so, Rushier, thank

1407
01:12:41,680 --> 01:12:44,720
Speaker 1: you for being so generous with your time. We have

1408
01:12:44,840 --> 01:12:48,720
Speaker 1: been speaking with Morgan Stanley's Rushier Sharma. UH. If you

1409
01:12:49,080 --> 01:12:52,479
Speaker 1: enjoy this conversation, be sure and look up an inch

1410
01:12:52,560 --> 01:12:54,599
Speaker 1: or down an inch on Apple iTunes and you could

1411
01:12:54,600 --> 01:12:58,519
Speaker 1: see the other hundred and twelve or so uh such

1412
01:12:58,560 --> 01:13:01,880
Speaker 1: conversations that we have had in the past. I would

1413
01:13:01,920 --> 01:13:05,679
Speaker 1: be remiss if I did not thank Uh. Taylor Riggs

1414
01:13:05,680 --> 01:13:08,760
Speaker 1: are ahead of UM. I'm gonna do that again. Let

1415
01:13:08,760 --> 01:13:10,759
Speaker 1: me let me see if I can get Taylor's name correctly.

1416
01:13:11,400 --> 01:13:15,160
Speaker 1: I would be remiss if I did not thank Taylor Riggs,

1417
01:13:15,560 --> 01:13:18,599
Speaker 1: who is our book or extraordinaire and and chases down

1418
01:13:18,640 --> 01:13:21,200
Speaker 1: these folks UH for me in order to bring them

1419
01:13:21,240 --> 01:13:23,439
Speaker 1: here into the studio and share their thoughts with you.

1420
01:13:23,920 --> 01:13:26,280
Speaker 1: And Michael Batnick, our head of research, who helps me

1421
01:13:26,360 --> 01:13:31,880
Speaker 1: prepare all these insightful, thoughtful questions. Uh. We love your

1422
01:13:31,920 --> 01:13:36,600
Speaker 1: comments and feedbacks and we have a specific feedbacks. What's feedbacks?

1423
01:13:37,040 --> 01:13:41,120
Speaker 1: Feedback be sure and right to us at our dedicated

1424
01:13:41,200 --> 01:13:45,200
Speaker 1: email address, m I B Podcast at Bloomberg dot net.

1425
01:13:46,000 --> 01:13:49,719
Speaker 1: You've been listening to Masters in Business on Bloomberg Radio,

1426
01:13:50,320 --> 01:13:53,479
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1427
01:13:53,479 --> 01:13:56,519
Speaker 1: to bringing higher finance to lower carbon named the most

1428
01:13:56,560 --> 01:14:00,840
Speaker 1: innovative investment bank for climate change and sustainability by the Banker.

1429
01:14:00,840 --> 01:14:04,160
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01:14:04,200 --> 01:14:05,840
Speaker 1: America member f D I C