Interview With Ruchir Sharma: Masters in Business (Audio)

He is also the head of Emerging Markets for Morgan Stanley. A person who may not be well known to the investing public, but is very influential on Wall Street. Frequently writes for for for outlets like The New York Times, The Wall Street Journal, UH, the FT, describing what's happening UH in the world and in the global economy. His most recent book is called The Rise and Fall of Nations.

His previous book was on Breakout Nations and if you are at all interested investing overseas, he has some very very specific ideas about what you should and shouldn't do. And I don't mean by Brazil, sell Russia or anything like that. It's really his process that's so good. He the most recent book, The Rising Full Nations. It's a ten point treatise on these are the ten steps you should make before reaching a decision about buying or selling

any particular region in the world. UH. He's very rigorous and analytical, and his thought process is different than from from what all too many people I think UH do when they approach emerging markets. I found it to be a fascinating conversation and I think you will as well. With no further ado, my conversation with Rucier Sharma. This is Master's in Business with Barry Ridholts on Bloomberg Radio. My special guest today is Ruscier Sharma. He is Morgan

Stanley's chief Global strategist and head of Emerging Markets. He has quite the fascinating background. UH. He manages about twenty billion dollars with a team of twenty five people. He is a frequent contributor to The Wall Street Journal, Financial Times, Foreign Affairs. Raised in Delhi, the son of a military officer, and had written for India's largest financial daily, UH, the

Economic Times since the age of seventeen. Rusher is also the author of several books, including Breakout Nations, a two thousand and twelve best seller, and more recently The Rise and Full of Nations, uh New York Times bestseller that just came out this year. Ruscier Charma, welcome to Bloomberg to be your Mary. Thanks. So I have so much stuff to go over with you. I'm I'm fascinated by your background and and your travel history. How did you

develop a love for international travel? Yeah, you know, like I've had a nomadic existence, I um. I was born in the south of India, and then because my father, as you mentioned at the outset, was in the services. He was a naval officer and also spent some time as a diplomat in overseas locations like Singapore. So that's why I had a nomadic existence, traveling from one place to another. I think that may have some way seated

this interest in global affairs at a young age. So before you started at Morgan Stanley in six how many countries have you lived in or at least visited prior? I had lived in for a large part of my life in India and then also in Singapore. And although I had visited other places, I um, you know, like apart from Europe and being to London, et cetera. But

I'd say that it was my education in Singapore. I went to a school they called the United World College, and uh, at a very young age, they sort of paid a lot of attention because it was an international school.

They paid a lot of attain to sort of uh showing you about exactly like about global affairs and and it's also like these are things which are so hard to know when or water or y. But at a someone like at a very young age, I was always very interested in current interfairs, whether it was Indian current affairs or global current interfairs. And I think that that's what really sort of uh set me in motion here. So so let's talk about your job at Morgan Stanley.

You're you're their global chief strategist as well as head of Emerging Markets. What do those jobs and tell? But I'm basically like an investor, So the investment management side I spend. I've always been on the investing side, and uh so, um, I run money or managed money. So

is that is that number of ballpark twenty billion dollars? Yes, that's right, just over twenty billion dollars in sort of assets under management and also sort of think about global macro issues for the firm, and so that's what sort of gives me my other title as being the chief Global Strategist. So how much of that money is dedicated to e M and how such of it is? Well, the money I directly manage is mostly dedicated to e M. Yeah, um, we also have some uh some global money which we manage,

but mostly it is money that I manage. But in terms of the chief Global Strategies footprint really involves thinking a lot about the major global issues and interacting with clients and telling them about that. So there's no substitute for for boots on the ground and seeing contributely. Yes, how often are you on the road? How many countries do you go to a year? And what parts of

the world have you been to recently? Yeah, I try an average, I'd say about one country a month, which is, you know, basically pick a country and spend nearly a week there or at least a few days there. If it's a small country, then maybe just go to the region. So that's what I've done for the last twenty years. Really, Yeah, because I find that there are two things here, you know, which are sort of very important out here. One is the fact that when you're on the ground, it focuses

your mind like never before. Like I consider in my face and I can read all I want about Philippines, and I just will not get that involved with the Philippines until I go to the Philippines. And then when you are there, you're basically sort of you know, covering it, uh, top down to bottom up in terms of your meeting the policymakers, meeting government people, central bank people, You're meeting CEOs of companies, and then also meeting investors and you know,

sort of other players in the marketplace. So I find that really fascinating, that one that it focuses your mind when you're on the ground, and to that you end up always picking up little details about that country which you wouldn't have if you were just doing an office in a dry research report. That's I'm doing the math in my head, one country a month for twenty years. How many countries have you been? I assume there are a few repeats, you know there are are there even

two hundred forty countries? Aren't well, roughly that much. I think the UN councils over two hundred countries, So you know, like I counted the other day. Uh, and I've been to just over sixty countries. That's pretty good, that's pretty but you know, like that's amazing that I think that I've traveled so much, but I haven't that only been to sixty countries out of whatever two d odd countries

that you can possibly go. Tom having said that, of a few key countries that I do visit repeated, like China, India, those are the kind of places where I've been to virtually every year. So this year, when you go overseas and you visit people, what do they want to talk about besides the US elections? Well, I mean that's really

top of mind. I mean, there's never been dominating every absolutely, there's never been so much interest in the US elections or in US politics as has been the case this year. And you know, like yeah, even after the election was over, even now, people are still sort of dissecting it in a way that the you know, because I think that that's a that's the big difference that had someone like Hillary won the election, then I think that what would have happened was that in terms of that, I don't

think the interests would have been that high. So whether we like Trump or not. The one thing which is great for I think is ratings and keeping the interest very high in US politics, no doubt about that. So given their interest in the U S election and given what Trump has said about um trade policies, what sort of reaction have you been hearing since the election from

contacts overseas well? I think that, you know, there's a big fair factor just now because I think that in the emerging markets there's been a huge sort of shift in sentiment, which is that there was a sense before the election that you know, there's some sort of recovery

as we under underwe in emerging markets. But after the election there's been a dramatic shift in mood because now all of a sudden, people are wondering that does this mean that the US is going to turn much more inward, more protectionist and the one place where sentiment is totally beaten down to fight that's my next top all, So I'm gonna go. That's my next country I'm gonna visit is Mexico. Has to be. Yeah, I'm Barry Ritolts. You're

listening to Masters in Business on Bloomberg Radio. My special guest today is rusci Or Sharma. He is Morgan Stanley's Chief Global strategist and a world traveler. Most recently, he is the author of The Rise and Fall of Nations, Forces of Change in the Post Crisis World. Let's talk a little bit about the four d s you write about in the book depopulation, deglobalization, de leveraging and d democratization. I bet when you wrote it you weren't trying to

be ironic. But here we are, and and each of these things are now much more intense subjects than they were just a few weeks ago. So let's start with depopulation. First of all, what is depopulation and how does population impact various countries? Yeah, look, you know, in terms of there's means uh so much handwringing over the last few years about why economic growth is so low across the world, and this is not just a US phenomena. It's across

the world. In fact, there is no region in the world today which is growing at the pace it was before the global financial crisis of two thousand and eight.

And one of the most underappreciated factors for this low economic growth environment is the change in demographics across the world, not just in the Western world as popularly believed, but also in large parts of the emerging world China, Korea, Taiwan and Russia, really because because the assumption has been that when you look at the Western world, you know, the Japanese or an aging society with no immigration and a limited number of young people. In China, their one

child rule really has impacted um their demography. The US seems to be growing faster than Europe, but the assumption is always well, emerging markets in African South America, they have to be populating wildly. Are you saying that's not the case. That's true, but there's been a massive slow down in the growth of population across the world, and of course in places such as Germany or even Russia

and all it's turned negative. The working ash population increases, really yes, and in China for the first time it's working ash population in fact fail last year. So these are huge changes which are taking place. But even in the very populous countries which you talk about in Africa and in places like India and Pakistan, the slow down

in population growth rate has been quite sharp. Really, Like, as you know, there are two drivers of economic growth, which is one is the increase in labor force, and two is the increase in productivity. Those are the two

things which drive economic growth. And when we look back in history, what we're gonna see is this, which is at the period from nineteen fifty till about two thousand and eight was the fastest growing period in the history of economic development, much faster than even the growth rates we saw in the Second Industrial Revolution in the late

nineteenth century, when you had a massive movement productivity. And the reason for that was that the world's population and therefore the world's labor force, never grew at such a rapid pace as was the case between nineteen fifty and two thousands and eights. So so let's unpack that a little bit. I'm hearing you saying that there was used post war baby boom. We all know that that was not just the US but global. Yes. Um, you also

had a massive uptick in productivity. Yes, at least until let's go at the late nine ten nineties, where there's an argument to be made that there's still an increase in productivity, we're just measuring it all wrong. And then third, we're now at a point where population growth has tailed off, and that's the new normal. That's the reason that the economy being as the single most important reason. As you said, like on productivity, there's still a debate where many people

think it's being underestimated, mismeasured and stuff. But on the trends and demographics there can be no debate because those trains there to be seen. And here's the basic train, which is that still the middle of the last decade, the world's working each population was growing at a pace of about two percent. Here since there's been falling off a cliff and today that rate is down to one percent a year. Do you think we're going to flatten

out or even go negative? Well, I don't know about being negative, but the peace is set to slow down further. Because that's fascinating because we've my whole life, I've heard these dystopian forecasts that overpopulation ten billion, fifteen billion, twenty billion, what are we gonna do. We may actually reach, just basis and sort of fun a population that we tap out at eight nine billion. And yeah, I mean, the world's population is still set to increase further, but the

pace has slowed down dramatically. So that's the important thing, and that's the very important variable for economic growth, which is Now let me ask you why is the population slowing? Because I would have assumed, well, wealthy countries tend to have better healthcare, access to birth control, fewer children. But you're implying this is a global phenomena. Yeah, but I think that it's also because you've had an increase in female participation in the labor force in many countries, and

so people are having less babies in in general. So I think that it's also like a lifestyle issue. It's a it's a demographic issue in terms of the mortality rates have dropped everywhere, and so have the fertility rates have dropped even faster. You know, fertility rates drafting faster. What's the driver of that? Well enough example, take India, you know, my homeland, which is that that the real rate they used to be about six or so in the nine sixties, that's down to two and a half.

Because you know, there are much more sort of sensitive about families about how many children that they're having. Uh, you know, so that that sort of paces slowed down dramatically back there. I could talk about population all day. Let's move on to the other d's deglobalization. Yeah, given the results of the election. Let's talk a little bit about trade barriers and how important free trade is to

the global economy. Yeah, you know, there are three drivers I think of globalization, right, so we think of it mostly in terms of trade. But the other two drivers are capital, right, the free movement of capital between boarders, and the third is doe with immigration, trade, capital and immigrants.

So these are the three tenets of traditional globalization. All these three increased massively in the nineteen eighties and nineteen nineties, right up until the financial crisis of two thousand and eight. You've got explosion in all these three. Since two thousand and eight, they've all slowed down dramatically. So cross border capital movements much slower than much slower, absolutely, I mean

like those are virtually collapsed. And we know immigration has certainly can hit actually slowed down, and trade and trade has slowed down. That you know, we have we've all been used to a world where trade has increased at a rate which is much much faster than global economic growth. And that's not a one off course I've seen the occasional monthly trade is a little less. No, it's a

month you're phenomenon. I'm saying that This is persistent now on a train basis this decade, and if you look at the policies that the governments are taking, I think that these trends will only intensify. And the election, which you pointed out just now in the US is basically another traind an answer. I trade ell actually some degree, I mean, we'll see what actually of TPP and done with. I think a TPP et cetera are dead. I mean, I really don't think that those things after we're going

to see a change. And is it realistic to change now? It's gonna be much more difficult. But I think that you know, that is something that we're likely to like to obviously see touched upon. As I said, at this stage, it's very hard to know what all Trump is going to follow through on, in which on what he said in the election, But I think the direction is clear, which is on all these three things. I do not see a major pickup taking place anytime soon. And here

at history is very instructive. In fact, I've looked at this, which is that globalization tends to move in waves, which are multi decade waves. We saw a big increase in globalization take place also in the late nineteenth century right up until the first decade of the twentieth century, and then from nineteen fourteen onwards with the outbreak of the First World War, we've got a big decline in globalization

which lasted for many decades. So my sort of bet at this point is that the globalization is here to stay. This is the new buzzword and a multi year traind not just uh, you know, like a freak data event. I'm very results. You're listening to Masters in Business on Bloomberg Radio. My special guest today is Russier Sharma. He is Morgan Stanley's chief Global strategist and head of Emerging

Markets and manages over twenty billion dollars in assets. He is a frequent contributor to various media outlets and is the author of The Rise and Fall of Nations and Breakout Nation, which was a highly regarded book that came out in So let's talk about that phrase. What is a breakout nation? Right at that point in time when I wrote the book, it was really sort of to bust the myths of the brick countries, which is that

there was so much hype about the brick nations last decade. Right, Thank you for that, because it seems like Brick was created because it was an amusing acronym, but really, what is it that ties China? But I think yeah, but I think if to understand the sociology as to why it became so popular, which at that last decade, we saw an unprecedented boom in emerging markets. Virtually every emerging market did well last decade in economic growth terms, equity

market performance, financial terms, every emerging market did well. And then Brick captured the four largest emerging markets. That's it. So this was a great marketing acronym, but like all marketing creations, it had a use markets. So so I think that there's there were a flurry of acronyms which came out even after Brick, but they've all failed since and Brick today appears like such a last decade concept.

So the book in two thousand and twelve, which I wrote, Breakout Nations, was that, Okay, the Brick era is over. Which are the next countries which are likely to do well across the world. Let's talk about that. What are some of the countries that may not make for a perfect acronym but have a lot of growth potential? Yeah,

you know, when I wrote that book. At that point in time, I had pointed out in the emerging world to countries such as Philippines, Indonesia, I had pointed out to some countries in Eastern Europe such as Poland, Czech Romania, and then I'd also sort of pointed out to some so called frontier markets. Now I'm out to find the

difference between emerging and frontier. Yeah. I think the difference between emerging in frontier, at least in the investing world, is that emerging markets are seen to be mainstream countries in which you can easily invest and get your money like in and out. Frontier tends to be the next category, which are markets which are slightly off the beaten downpath. Give us a few examples. Yeah, For example, like in the frontier markets today, you would have countries such as Kazakhistan,

or you would have Romania. But the largest ones you would have our Nigeria, Vietnam. I was going to ask you about Vietnam. Frontier market, not a emerging market, not as yet. It's a classification issue, right, which is that the difference is not that much, But it's a classification issue. So how do you define that when I think of Vietnam. I think of a country that is rapidly adopting Western technology and and all variations of capitalism, a lot of

outsourcing to Vietnam. They're a competitor to China, and they seem to be booming. Yeah. I mean, like Vietnam is a country that I'm optimistic on in my in my latest book, when apply the ten rules, Vietnam does come up fairly well. What about Turkey. Turkey is one of those countries. Turkey the country on which I've changed my mind, which is that Turkey used to be a country which

in Breakout Nations I was relatively optimistic on. But I think that from about two thousand and thirteen, when Urduan began to lose the plot, I think that since then I've been much more skeptical on Turkey, and remains skeptical on Turkey today because Turkey is a country which is running massive financial imbalances, one of the largest current account deficits of any emerging market. It has not been able to correct that despite the very sharp fall in commodity prices.

And then you have the case of Urduan. I mean, here is a leader who seems to have overstayed his welcome in power. When Urduan first came to power, he was a reformer. He wanted to take Turkey closer to Europe. He implemented lots of reforms to try and meet the requirements towards a move to the European Union. But if you look at how he's governed in the last few years, it's been very different. That his entire focus has been on cementing his hold on par even if that comes

at a major economic cost. So let's talk about something related to that. The old line I was familiar with was geography is destiny, right, but your variation of it is look for the geographic sweet spa. So what is the geographic sweet spot and what countries are are in it? Yeah, So, like what I mentioned there is that if you look at the history of economic development, countries, particularly the mid too small countries have done well when they are in

the right trade routes. So if you have in some of the world's major trade routes and those countries find themselves in those trade routes, they have done pretty well. So those countries today, Vietnam is a classic case of that. You know, like it's there in the trade routes south of you know, like China, and in terms of how like Vietnam is doing, she Lanka is another example, like strategically very well located. Then you have in the Middle East Dubai, you know, which is sort of done well.

So just just the fortuitousness of being, yes, near deep water port, near near trade routes, etcetera. Yes, I think that's something which is a you know, which is a helpful. Now again, there are many countries who can completely waste that dividend that they get from being in the right geography right, so it's a huge help to store wars exactly like it's a huge help to start with, especially for a small to mid size country, and you know,

Singapore Hong Kong in the past have shown that. Having said that, I this is one thing which I think I have to adjust to the new reality that in a deglobalizing world, which we just spoke about, I think in that environment to be able to export your way

to prosperity is going to be much more difficult. So I think the world is now beginning to change on that that it's no it's no longer that easy to export your way to prosperity and being in the right geographical sweet sport is still helpful, but not as helpful as it used to be when the world was globalizing. I'm very hults. You're listening to Masters in Business on

Bloomberg Radio. My special guest today is Ruscier Sharma. He is Morgan Stanley's chief Global strategist and head of Emerging Markets. Let's talk a little bit about some of those emerging markets and and some of the issues that we see going on. I've noticed that people have a tendency to really over generalize about emerging markets. Are they all that similar or are there that many dramatic differences from country to country. There are dramatic differences, and over time those

differences show up. But I think that in the financial community it's very easy to club them together, especially in a world where passive investing is on the rise, and uh, you know, people just want to sort of okay, emerging markets are doing well, and they just put something in an eat have blindly and and sort of get on with it. I think that it's become easy to generalize. But yeah, over time, the differences are huge, and the

performance of countries is very stark. In terms of like the differences over time, like this decade, Brazil, Russia have performed so poorly. On the other hand, you have countries like Philippines or even like in Indonesia, which I've done much better, countries like India which are still sort of growing. China's economic prospects are changing for the worst very quickly. So let's address a few of those countries. So let's let's look at the two biggest one you mentioned, Russia

and China. I've been hearing about Chinese debt now for a decade. Jim Chanos famously started planning the table five years ago about this. But really this now, more than ever, we're seeing China appearing to really have taken on a whole lot of debt. How much trouble is China in and can they grow their way out of it? Because I've dedicated in an entire chapter in my book to the issue of debt. I call it the Kiss of debt.

That in the ten rules that I look at to figure out if a country is going to do well or not do well in the foreseeable future, the one in which I have the maximum confidence in is the Kiss of debt rule. Why because we did a lot of research on this, that's my team and I and what I found out here was that if a country's debt increases very sharply over a short time horizon, that country always gets into trouble. It's not going to do with the level of debt. It's got to do with

the pace of increase. If you take on too much debt over a very short time horizon, you're bound to make bad investments that are bound to be bad loans, a lot of mal investment in the economy, and that's going to come back to haunt that economy and China. The dead binge that China has been on this decade is unprecedented. So the question about that, and I don't know if you can answer this. They seem to be making so much money, They built so many factories, they

were attracting so much economic activity. Why would they have to take on all that? Yeah, that's my point, which is that instead ambition to grow at a rate which is no longer feasible or no longer sustainable. So till two thousand and eight, until the global financial crisis, China's dead situation was relatively stable. So you know, China's dead was increasing, but increasing in line with the you know, with the underlying economic growth rate. So it was relatively stable.

After the global financial crisis, and when things started to slow down across the world, you know, like you're a major slowdown, their exports got very badly hit. They still wanted to grow at a rate which they thought was

right for them. And this is one of the problems that you have in a sort of that kind of economic system, which that they come up with a growth rate and then just want to achieve that no matter what, regardless of what the reality on on the growth pure absolutely so I think that that's what China has been doing, which is that it wants to keep growing at a target it sets, which is, you know, six to seven percent.

That target is set with only one objective, which is in two thousand and ten, they decided we have to double our economic size by the end of the decade. And so the man that they did were that we need a growth of eight percent first and seven and six to get there. And so they're following that path, but they're taking on debt like never before. There's one

simple statistic about China which would worry us. At the peak of the US housing bubble in two thousand and seven, it was taking three dollars of debt to create a dollar of GDP growth in the United States. Today, in China, it's taking four dollars of debt to create a dollar of GDP growth in that country. That's been the explosion

in debt in China this decade. Your reference Russia before also, I've always sort of of Russia as a very challenging place to invest corruption rule lord just you know, and this is before Putin, and now it's even more challenging. Is Russia and investable nation. But I think there are pockets of investment out there. But I think as far as Russia is concerned, it's really gone what I call X growth, which is that X growth, yeah, which is that The best you can hope out of Russia for

economic growth rates now is one or two percent. You know, this is not an emerging market type growth rate that you would think. It's demographics are terribly against it. They're losing educated populations and total populations. And and then what's happening also is the fact that the investment environment Russia is very difficult. The only thing that Putin has done to his credit is made the best of a bad situation. He's trying his best to make sure that the country

doesn't go bankrupt at these loil prices. So he's adopted austerity. He's allowed the central bank to devalue the currency and to raise interest rates to keep inflation under control. He's really doing that. So I think that his game is very clear, which is that keep the economy from imploding, particularly on metrics that really hurt the people, which is inflation. And he focuses much more on invoking nationalism to remain popular.

But the economy is ex growth that I mean, like it's now flat flat at best, you know, one to t percent type economic growth rate from Russia for the foreseable future. We're speaking with Morgan Stanley is Russia Sharma about emerging markets. He's the author of the Rise and

Fall of Nations. Let's get a little macro in our conversation about em When I look at forces around the world, are emerging market forces more susceptible to boom and bus cycles than developed nations or is it a similar pattern that they follow relative to what the US and Japan and Europe experiences. Yeah, I think that again, we have to sort of classify which emerging market we're talking about,

Like the Chinese stock market. The domestic stock market is like it's had it's had a wild run for the best, a wild run which is unprecedented, right, I mean, as one sort of wise person put in that, it's like a casino without rules. Right, So what about the sense what about indexes in in and markets in India. Yeah, but I'm saying that I think that India has a healthier stock market. I mean it's a deeper capital market, So I think that India is better deeper capital markets

in China, well in terms of the domestic market. Yeah, in terms in terms of by deeper, I mean what I mean is more well regulated to work we have in China and less susceptible to the booms and bust. To the Chinese stock market, I mean the chance market is very deep in terms of the amount of liquidity and turnover that huge in China, but it seems like it's a housewife's day trading phenomena. That yeah. I mean there are parts of it, you know, which are that too.

So that's the problem. Like the Chinese stock market, the Chinese stock market has never reflected economic growth in China, there's no connection between economic growth and the Chinese stock markets performance of the last twenty three years. Now, some people would argue that it's hard to draw a straight line between US economic growth and the stock market. They don't always sync up exactly there over long periods of time. A long expansion tends to lead to a long ball market.

But we have a tendency to sort of occasionally go up. Just look at the gains of the past seven years of the market relative to the comes true. But you know, but at least like you get a directionally there's yeah, you know, I mean, you know direction, you get some similarity on overlaid on this. When you get such easy monetary policy, you end up getting you know, financial excesses. But in China's case, you can line it's like totally random.

So I'm saying that, and that's not true for most countries. If you draw a line over time over how the stock market has overall economy has done, there is a relationship. Let's talk about South America, where here in the United States we really don't pay a whole lot of attention to as investors. There's been some social turmoil, there's been some political turmoil in South America. What do you see

going on there and what's of interest to you? But I think that Latin America is one place which is breaking for the better on the political front, right that at a time when populism is on the rise in so many parts of the Western world, Latin America is seeing something very interesting, which that you are seeing the return of economic orthodoxy in Latin America and names in countries.

For example, you take the classic case of Brazil that in Brazil's case, that that country had really sort of gone from being the start of the emerging world last decade to being the posted child of ward. All is wrong with the entire emerging world. Just there are messes, their complete mess But having said that, in the Dilma world, after she was impeached and you have a new administration out there, the kind of reforms that they're taking place

are quite encouraging. Now it's a terrible situation still, but at the margin, starting to turn around, starting to turn around, and what they have done is quite remarkable in terms of starting the cleanup process after the big mess which was left behind by the previous government. You talk about reforms, you discuss why reforms are so important to emerging market economies. Go into a little detail about that, and you mentioned it in the book. I know you've written about it

in the past. Why is economic reforms so significant to emerging market countries? Well, I think that you know, reform is significant for all countries, but in emerging markets there's so much to be done because there's so much of the economy which is functioning in an inefficient way in these countries and therefore the per capita in contains to be much lower that there's so much which can be done to clean that up and for those countries to

move to a much higher per capita incomplain. But I mean, so it's just the function of you gets get her act together. The population makes more, has a higher income per person, and everybody is But the reforms have to be sort of very country specific in terms of what's required, right Like give you example, like in the case of India today, it's the banking system which is a complete mess.

So you need you need to clean up of the banking system much more sort of private sector involvement in it, because the banking system is so dominated by public sector or government owned banks. So that's like a adea of reform as far is they need a little fatism there and spending a You can argue that in terms of it. Now, some of the countries, the reform requirement maybe something very different in terms of what needs to be done, like in the case of Indonesia, like there was a huge

amount of a black economy, unaccounted economy. How to bring that back into the mainstream. Isn't that a common problem in in a lot of countries. Yeah, that's a common problem, but more so when some than the others. Right now, So I think that in terms of reforms is a catch all term, but for each country we have to be sort of careful about what exactly we mean by reform and what exactly can be done politically, because I'm not interested in sort of rattling off that X, y

Z country needs to do ABC. I'm more interested in what is the political environment like in a country and what sort of reforms are likely to be passed and what that means for that countries economic growth, trade going forward. We've been speaking with Ruth Sheer Sharma. He is Morgan Stanley's head of Global Equities and the author, most recently of the rise and fall of nations. If you enjoy this conversation, be sure and stick around for our podcast extras.

Will we keep the tape rolling and continue discussing all things emerging market. You can read my daily column on Bloomberg View dot com or follow me on Twitter at rid Holts. We love your emails and comments. Be sure to write to us at m IB podcast at Bloomberg dot net. I'm Barry rid Halts. You've been listening to Masters in Business on Bloomberg Radio, brought to you by Bank of America Merrill Lynch seeing what others have seen, but uncovering what others may not. Global Research that helps

you harness disruption. Voted top global research firm five years running, Merrill Lynch, Pierce, Fenner and Smith Incorporated. Welcome to the podcast, Russ here. Thank you so much for doing this and being so generous with your time. I I find em to be a fascinating area and it's it's a pleasure to speak to an expert in It great to be here, Mary,

thanks for having me. So we missed a bunch of questions um during the broadcast portion, and I there's a few I really want to jump into and you said a few things that I took some notes and wanted to follow up on. UM. You referenced e t f s and kind of just blindly buying as opposed to focusing on countries. I remember if you went back ten or twenty years and you wanted to invest in emerging markets, it was really hard to do. So there were a

handful of managers who specialized in it. You had a lot of currency risk, the funds to do it was pretty expensive. It wasn't cheap, and of course everybody suffers from the home country bias, their wildly overexposed to where they live and under exposed to the rest of the world. But what is it about UM the recent changes in emerging markets that have allowed more and more people access

to fast, easy and expensive ways to invest in the space. No, I think that in terms of that, this is a broad train that we're seeing across the world, which exactly which is, you know, a move towards passive away from

active kind of investing. And my point is that in the emerging world especially, and I can argue that that's wrong and even in the developed world, but in the emerging world in particular, that's the wrong approaches because the differences are so sharp and the and the execution is also much more difficult, you know, like just to buy stuff which is passive. And then over time, emerging market fund managers do tend to outperform more than they developed

market peers. So I think that why is that is that the first to growth rate is that the well because I think that possibly more inefficiencies that exploit the differences, the inefficiencies that you can exploit those much more in the emerging world. So I think that over time there is benefit towards UH investing actively in the emerging world.

So so let's talk about an active investment in em If you look at the universe of possible frontier market and emerging market investments, what do you think are the most attractive countries today? And conversely, what are the least attractive countries? Yeah, I think that if you I mean, I uh, I think that it's easy to start with least attractive. I still find that China is the biggest risk in the emerging world. Yeah, because because of the

kiss of debt that we spoke about all that. So there's a come up and its coming and it just hasn't it. Yeah, yeah, yeah, yeah, And even if it doesn't hit in a big crisis blow, it's like an insidious sort of uh trend, which is that it sort of eats away slowly at the growth rate over time. So I think China is so to let me out, let let me jump in here and and digress us to a related question. If China has a debt problem and and a huge economic slowdown caused by that, what

does that mean for the rest of the world. I really look at China as more of a reflection of how the industrialized or or Western advanced economies are doing, because they're the manufacturing department for the rest of the world. But having said that, I think that there is a sort of big difference here, which is that dead levels and the rest of the world have stopped going up much, right,

and if anything, they've begun to de leverage. And sometimes one of the questions we didn't one of the these we didn't get exact exactly. So some countries are de leveraging, including you know, countries such a Brazil and Russia possibly and even in the United States, the government debts going up on the private sector side, that dead levels of at least stabilize, you're not going up anymore, particularly household

in the financial side. But in China's case, debt has been exploding like never before, like almost no country before it. So I think that it what's their total amount of debt and what's their debt to GDP depends how you calculated, but something between two dent as the share of the GDP China's debt today. That's huge, and there to the United States were barely similar. It's no, I mean, it's I'm talking about total debt. I'm talking about not so

private exactly. So the US dead levels are almost similar to China. But the differences it's twofold here. One that the increase in China's debt has been much sharper than anything that the United States is. And to that typically the richer you are, the more debt you can afford because you have that much wealth to offset it. But in China's case, the dead levels are as high as the United States today as the share of its economy. Even the Chinese per capita income, it's wealth is a

fraction of that of the United States. Yeah, so I think that the Chinese dead situation is very troubling to me, what what other countries do you think are potentially problematic from an investor's perspective. Well, I'm still concerned about Turkey because I think that in Turkey the interest rates in the U S. As they go up, they're very dependent on foreign capital. So Turkey is still some country that I'm I'm concerned about. I think that's South Africa, Africa.

I think the African growth story in many parts is over. You know, something that we were all sort of looking to Africa rising now that are still pockets in Africa. So I wouldn't generalize about the entire continent, but many parts of Africa, from Nigeria to South Africa face a rather bleak growth future. So I think the very problematic

the whole. Yes, I think then in a deglobalizing world, countries such as Korea, Taiwan, and even Hong Kong, Singapore, all these countries which relied much more on external demand to grow, I think that these countries are face much bleaker future than they did in the past. So that's the bleak side, the dark side of the of the world. On the positive side, I think that you know, in my book of course, I talked about both developed and Emerging Countries my new book. I think that in the

emerging world, I think the Indian subcontinent looks okay. The growth prospects look decent. That Eastern Europe I think it's cleaned up its act a lot, Poland check Romania, those kind of countries. I think Latin America, as I mentioned, because of the politics, is getting better, whether it's Brazil, but more specifically Argentina, Peru, these kind of countries, the economic prospects are improving. And then the developed world two

countries like the United States Germany, to me, they look fine. Now, you know, like we all here in the United States moan about all the problems that we have and our economic growth has been so low and this is the weakest economic recovery and post war history. All true, but on a relative basis, what we sort of have to account for is that the rest of the world faces

even greater problems. So whenever there's any problem in the world, people are still fleeing to the U. S Dollar, right, So because this is still the reserve currency of the world. There's no other currency out there to challenge the US dollar, are I mean, it's facing all sorts of problems just now, and it's financial sector is quite rittle, So this is not a currency that's about to take over the world

as the next reserve currency. So I'd say that. And Germany is still doing very well despite all the sort of problems in Europe, you know, Like it seems to me that a lot of the core European countries are becoming more uh sort of integrated rather than turning skeptical after the referendument places such as UK. So I would say,

there are enough bright spots in the world. But what we have to do, and this is a very important concept that introduced in the book, is to lower the baseline for economic success, which is too in other words, to start looking for four or five percent. Two and a half percent growth is fine, yeah, And I'm saying that to like for the develop world, I'd say even they see nor the one and a half two percent is fine because we have an anchoring bias, as we call it, which that we look at what we were

growing at the last twenty thirty years. And it's not going to say exactly and why right as a point out that it's because of demographics have changed. You just can't liver those economic growth rates anymore. The dead supercycle has ended in most countries. The massive increase in global debt we saw between night has come to a stall, barring maybe in odd China, but and they're facing problems because of that, but generally it's come to a stall.

And then you have an head of the globalization which the nations are turning more inwards. So the productivity boost from globalization is behind us now. So I think that these are reasons why we should not expect to grow, and that fits in with long term history to understand that the period between nineteen fifty and two tho eight was a very exceptional period and that period is not

coming back anytime soon. And once we accept that and lower the baseline for economic success, as you say that in the developed world, bring it down to one and a half two percent, in the emerging world, bring it down, you know, from whatever five plus for many poor countries, to bring that all down. So lower your growth expectations everywhere. Of course, the poorer you are, the faster your growth

rate can potentially be. We'll try from a lower base, but lower growth expectations everywhere, and then that's the new math for economic success and you'll be able to identify winners more easily. So when you look around the world, let's let's talk a little bit about valuation. Where are there, um the countries that you think have the upside and prices don't quite reflect it yet. Where where are is

their value out there? And and what's pricy? Yeah, I think that in terms of the fact is uh, that gets a bit more tricky because I think that clearly the US market is much pricier today. So even though the economic prospects look okay, because of the fact that you've had such a massive increase in asset prices here due to the faith easy money policies that here assets look very pricey to me in the United States, I think internationally the prices look somewhat better. Europe in particual

more attractive. Yeah, Europe in particular looks more attractive, and I'd say some parts of the emerging world too look much more attractive. So so how do you balance, Well, Europe looks cheaper and emerging markets look cheaper. But Europe is a mess and it doesn't look like they're getting

their act together anytime soon. But there are parts of so I spoke about Germany I spoke about, you know, some countries and it's Germany cheap because you look at at the southern countries that have had their problems, they look dirt cheap. It looks like everybody is afraid to put any money. Yeah, that's true, but I think that it's so um I agree, but I'm saying the cheapness

cannot be the only criteria for investing. You know, cheapness is it's got to be cheapness and growth potential is exactly. So I think that. And you know, from a country perspective, I find that if you get the growth rates correct, then you're able to sort of do well in those countries. Valuations take care of themselves exactly, so I'd say that,

so I wouldn't get too hung up on valuations. But generally, because of the massive asset price inflation we've seen in the world of the last few years led by the United States and the easy policy of the faith, cheap today is really a heart thing to find in the world. So so we mentioned during the broadcast portion the first two these the population and the global it's Asian. Let's talk a little bit about the other two. And you

just referenced de leveraging. So what what is this The impact of de leveraging on the global economent well, I think it makes it more stable over time, but also the fact that it sort of puts a downward pressure on economic growth, which is that between two and eight we've got a massive increase in global data as a share of the economy, and that that made the economy boom exactly like eventually, uh, you had a bust also at the end of So I think it's very difficult

now to get those kind of massive increases in in global dead because that also was a one off because global inflation was falling and global interest rates declined a lot in that period. And I think that those trains of bottoming out now. So I don't see dead levels going up across the world much in the next few years. And then we have the entire prospect of the fourth

day I speak about, which is demotization. Before we get to the fourth day, I have to ask you, so Reinhardt wrote off did their eight hundred years of financial folly and their perspective of is following a financial crisis because of the leveraging, you have a tendency to get this very subpar growth rate for a decade or so

and then things begin to revert back to normal. Are you in the Rhinehart and Rod Gralf camp or do you think that I think that, you know, the uh, their analysis is like not that valid anymore, because now we're in the eighth year after the global financial crisis, and I think that the reason why the global economy is weak today has to do a lot with the

fact that the demographics have changed that they mentioned. But so I don't think that that what happened in two thousand eight in terms of debt is that relevant today. But what is the elevent is that that levels of debt aren't going up that much anymore to turbo charge growth the way the growth was turbo charged between two eight. So there's a subtle difference here, But the secular change, it's that's not it's not that subtle. That's a major change.

If you're not expanding the debt and contracting it, obviously there's a big impact of that. So now let's go to the fourth D, the D democratization. UM, we had the Brexit vote, we had the Trump victory. What is D democratization? Well, I think that you know, UM for much of recent history, we saw an increase in the number of democracies in the world, right, So we saw this in the nineteen eighties nine nineties, that the number

of democracies in the world were expanding. But now what we're seeing is that that is no longer the case. In fact, the number of authoritarian regimes is increasing in the world today, with even some countries which were on the paths through democracy like Russia and Turkey, etcetera, turning much more authoritarian now. So that's what I mean by de democratization and what does that mean for the global economy.

What it means is much more volatility because what I find our authority and regimes is that the policy becomes much more unpredictable. So policy is good, you can get very good economic growth rates. Where policy turns bad, they're not ect and balances in place, and you can get very bad outcomes as well. So much more volatility and

global economic growth due to d democratization. That's what I think is going on, that the world is turning less democratic after a massive increase in democracy in the nineties, nineties and much of last decade, and an increase in authority and figures across the world from pute into eard one on the rise. So so how do you when when you're looking at different countries and you're looking at different regions of the world, how do you model geopolitical risk.

It's very difficult to model, but just to keep that in mind, which is the fact that you know, for example, people speak to me about that, what is something happened to the South China Sea with China aggressive for Japan.

That's the kind of stuff which is extremely difficult to model, right, but you can keep the impossible impossible, but at least keep in mind that the potential for conflict is going up across the world just today now because the United States is in retreat right, which provided this big purity umbrella for many countries, and defense spending is going up. One of the big trains I think which we're seeing in the marketplace, and something which I believe in is

that defense spending is bound to go up. The peace dividend is over. Like we had this piece dividend where you had one country which was sort of you know, benefiting UH or other providing a benefit to many countries as at loan superpower. I think those days are done now. So now let's talk about that. The United States provides UM. We have we have treaties with Japan, we have treaties with NATO. We prove work with South Korea to protect against North Korea. We work with Japan against the rest

of Asia. All along um, Western Europe. We promised to provide a bulwark against Russia and what used to be communist Eastern Europe. Are you suggesting that that's going to go away in the United States? Are gonna there? So? It seems so. I mean, you know, that's what the Trump presidency is partly about. Again, we don't know the details of the Trump presidency. We don't know in a how exactly is going to govern, but it seems that's the trend, and some countries are already acting as if

that's the trend. Really, yeah, because defense spending in many parts of the world is going up. If you look at it now, right, and whether it's a South where, where, where do you see defense spending going Well? I think that like you see it in parts of Asia, parts of the Middle East, like you see defense spending is now is not going up over the last few years. That's interesting because the number of conflicts has been going down steadily for decades. Yes, I wonder if that's gonna

Do you see that changing is? Yeah, because I think that if you again look back at history and you look at what deglobalization brings it, when nations tend to trade less with each other, the potential for conflict does go up. Nations turn more inwards. So I do feel that now this is stuff which is very hard to model, but it's a risk worth keeping in mind that that's the trend. So what do you think is the net under the radar country to to sort of burst out,

to become a breakout nation. Well, I think, you know, like in terms of in today's era, it's much more difficult. But if you ask me, you know one question that a lot of people ask me, and it's somewhat related to yours, that which region do I think which emerging region do I think could graduate to becoming a developed region? Very high heart transition to me, right, because today that about what was the last country that actually made that transition?

Well you can argue that something like greased it for a while then fell back. You can argue countries like Israel have have done that. Countries like Korea Taiwan or on the border. Uh, those last three certainly are are are fairly incredible example exactly. So I think that those are If you ask me the next batch, I would say, it's possibly the Eastern European countries really yeah, because check is also Romanias much further behind, but you know, Slovakia.

So so I think that these are the countries which have the best potential for making it to the next level. So why what what makes those countries so special and closer to being a developed country than than their peers and neighbors. Yeah, I think that one is in terms of that like the kind of economic policies they follow, which is that much more investment friendly, and because they're close to Europe on how to get integrated with Europe, so they have an aspiration to catch up with Europe.

So in terms of you know, the convergence aspiration, and also the fact that I find that they've focused a lot on getting their institutions correct, which is that you know, of very important of getting the same sort of metrics like central bank independence, of of having very strict inflation targets, of not doing uh too much ah excessive government spending,

m keeping the deficits under control. So there's basic economic orthodoxy that these countries are following and not doing all the bad things also, which is that they've kept the currencies to be fairly compared ditive, not joined the Euro fully.

So they're sort of in that sweet spot, which that they're not part of the Euro currency area, but they're part of the EU area, so they benefit from the trade linkages but don't get locked into having a currency that becomes uncompetitive and leads to all the problems that we saw in Southern Europe by adopting a common currency.

You know, we have a friend who is an art director at Pepsi and and does a lot of their their designed for various soda cans and packaging, and and i was looking at some of her portfolios and I'm like, oh, this is really interesting, and she goes this this and this Slovakia, this this, and this Eastern Europe. What do you mean. Oh, they have great designers and computer people, and they work for a tenth of what Americans do, and the booming, booming industry there, so very competitive in

terms of the exchange rate and their workforce. The labor costs are relatively low, so I think that these are all good factors for these countries. Quite quite fascinating. My last question before I get to my standard questions you reference in I think it was the earlier book the role of Billionaires in a country. So what do the number of billionaires mean to a country that's development? It's

then my current book. You know, one of my rules of the ten rules I speak about in So let's let's go over those ten rules then, because I wanted to get to that, and I'll hopefully we won't run too late, but quickly. Let's let's let's review the ten rules. Right. So, my first rule has to do with demographics, that people matter, which we talked about the second rule of the circle

of life. That's how how politics matters. That countries which elect new leaders and typically have their back to the wall are the best sort of conditions for economic reforms to take place in those countries. My third rule has to do with the involvement of the state, which is that typically if you have a very large, intrusive eight that chokes economic growth. Yeah, so like you need the state to be sort of efficient and right sized. Uh.

Then I speak about the good and bad billionaires. The fourth rule and this is a new introduction for me because a decade ago I would not have had this rule. Why have I introduced this rule because income in equality has become such a big factor across the world. That's a question and then gets and I'm glad you're bringing So in terms of income, in equality is factor. And we know that if a country becomes too unequal, that

leads to problems for economic growth in that country. So the Good and Bad Billionaires is a very live way of gauging whether inequality in a country has become too much of a factor and possibly goes against that country's cultural wealth creation. So you look at the number of

good and bad billionaires. If you have too many billionaires in a country, or you have if you have too many billionaires coming from industries perceived as being corrupt, which is real estate, mining, oil and gas, or if you have too many billionaires who simply inherit their wealth rather than make it on their own. Those are conditions which typically lead the population of a country to be against

the process of well creation. The flip side, and you know this is where the United States is still okay. If you have lots of billionaires coming from innovative industrieslogy, manufacturing, pharmaceuticals. Those people are respected answers financing well, finance I think is a border line little I'd say that I'm not surprised. Yeah, if you have too many billionaires coming from finance, I

don't think that's a good ning for a country. And uh, if a lot of the world is mainly inherited, like tends to be the case in place like Korea and other places, that's also not good for a country. But the place where the United States looks a bit weak because the number of billionaires as a share of the economy is very very large out here, So you ends up with a lot of income inequality exactly. But if you take all these things together, So that's the first five,

give me the back five. Right, So in terms of then I talked about geography, right, in terms of that sweet spot and trade spots that we spoke about. Then I speak about uhctories first, Yeah, that that typically countries which are strong and manufacturing and investment don do much better than countries which are strong and commodities and consumption. We certainly have seen that all around the world. Last, yes, you know, like you've seen that these commodity ridented economies

boom and bust very frequently. People have been calling it the curse of oil or the curse of commodities. So we've seen that overtime, countries which tend to focus more on manufacturing exports too much better than countries which export commodities. Then I speak about currency, that your exchange rate needs to be very competitive to be able to grow that if we have a very overvalued currency and and you

have like that's not a good thing. Then I speak about inflation on how low inflation is the bedrock for financial stability, but we also need to sort of focus much more on asset price inflation as well. Looking at just consumer price inflation is not enough. We need to broaden the scope. That you know, if you get housing booms financed by debt, that's a real problem. My favorite rule, as I said, is the Kiss of debt, because the academic work that I've done on it has the maximum

backing and very powerful. And the last rule is is maybe a bit of music, but really important is the contrarian rule, which is that if a country begins to appear on the cover stories of a magazine too often in a positive way that is usually not good for that country, because it tells you that the trend is maturing and that the leaders of the other country getting

too complacent. You call it the hype watch. The hype watch because, as I said, I began my career as a writer and a term I often heard about with the curse of the cover story, right, which that's something that makes it to the cover of a of a popular magazine, that trend tends to come to an end, is what journalists speak about. But I've done work here

to back that up. And what my work very briefly shows is that if a country makes it to the cover of Time magazine in a positive way, and two thirds of that time, that country does poorly in the next five years. On the other hand, of a country makes the cover of Time magazine in a negative way, then two thirds of that time that the time that

country does well in the next five years. Because, as it goes back to my original rule of the circle of life, that countries typically reform only when they have their back to the wall, and countries get complacent once they're already booming, and magazine editors feel embolding to put a country on the cover in a positive way. Once a boom is a parent. The old joke is once uh it makes it to the editorial staff of Time magazine,

who's left to come in and buy that? That's the end of So those ten are fascinating In the last uh ten twelve minutes I have you. Let's let's go through um my standard questions uh to learn a little more about you if we can. Um let's talk about some of your We discussed your background. Let's talk about your early mentors. Who who is influential in in helping your career along? Well, I think that you know that I mean like in terms of like a combination of

people out there. The firm that I uh that I joined at at Morgan Standy for example twenty years ago, where led by a very interesting character called Barton Biggs, so like so like he he really sort of uh showed me this combination of investing in writing could be such fun. So he's definitely someone I think that who was in like an inspiration for many people out here.

But you know, from an investment standpoint, I'd say that, well that I was very fortunate that when that the person I first worked with back in Asia with somebody who showed me that you really need a very good temperament for investing. And I think that's something which we all tend to possibly underestimate. Temperament for investing, which is there some more details on what do you mean by that? Yeah,

because I think that so many people. I mean, one of the big problems we have in our industry is people sort of you know, like too wedded to their screens and two weady to daily price movements and often chasing their tail and um, often with very little ability to withstand pain in the short term, and and being too momentum driven. Right. So I think that what one of my first UH people that I worked with really taught me was that how do you have a good

temperament for investing? How can you take the long view and and have the patience to sit through uh the uh like the long view. So I think that temperament for investing is something is very important. That's interesting. Let's talk about investors who and this keeps buzzing and I keep shutting it off and I can't get it to stop. That's that's what I've been doing here. Um, what investors

have influenced your approach to investing? Who's affected the way you think about putting money to work in emerging markets. But as I said that I learned you know that, you know, the people that I initially worked with, including Barton and some of his colleagues, you know, like obviously

had a big influence on that. Uh. But I also feel that, like like some of the macro style of investing, you know, like the people that I have, you know that we all grew up admiring with the likes of the job sorry is Julian Robertson's of the world, and I was fortunate to interact with some of them at

a very early stage of my career. So I'd say that those type of people who you know, the classic big edge fund investors of the nine nineties, uh, look like such as these characters, I'd say, you know, we're very influential in the way that I think that I've grown up. So you've written two books, You've published everywhere from the wall, strettourn over the f T, you know, all around. Let's talk about who you read? What what books have you enjoyed, be them be they fiction or nonfiction,

market related or not. Well, I tend to read a lot of biographies, because I really sort of find those fascinating, especially which you know, take me back into a different period of history. Give us a few. For example, this year I read, you know, like John Mitchum's book on George Bush, the first right, which is George H. W. Bush.

I found that a very interesting book in terms of it's a fascinating tale of how some one can win a war and lose an election and sort of you know, to take us into the mind and it's such a different error. Also that you a total a totally different Republican from a different era. Complain what we see too is different. Everything, everything is different. So I think that was a fascinating book to read. I mean, then I think Charles More's biography on Margaret Thatcher, Andrew Roberts book

on Napoleon. These are like some of the biographies that I've really enjoyed reading in recent in like recent times. Um that In terms of investing, I think that, I mean, I like books which you know, like tell me more about investing behaviors. I think that someone like Nicholas Talib has written some good books on that randomness. And then yeah, like the concept of antifragile was very strong even though

that book itself didn't do that well. But the concept of anti fragile I thought was it was like a very strong concept that if you're able to sort of you know, like the old sort of notion about which is sort of showed so well, if you're able to sort of you know, uh, if something can't break you, it makes you stronger. So I think that those are the kind of books which I which I like to read over time. But I'd say that the biographies in particular is my weakness. Um, I'm on my list is

The Right Brothers by McColl. Everybody I know who's read it just raves about it. I haven't gotten to it yet, but I think that's gonna be my next next holiday. Um read right, Yeah, absolutely, any other you ever read fiction? Anything else? Unfortunately I don't read fiction. But I'm a huge movie fan. And yeah, and I find I particularly

like watching international cinema. Uh. And I find that watching international cinema is a great way of learning about the social fabric of another country that's very interesting, whether it's European, Iranian, but there's some great international cinema. And I find that that so like. I don't think ever the week goes by when I don't watch one or two international movies. Really,

so this is a quite fascinating coincidence. Your podcast episode follows first Lawrence Levy, who was the CFO of Pixel Right, and then David Tuckman who um took channels like MTV and Nickelodeon and am A, m C and h MGM and turned them into international brands. And he literally took all these various US properties and turned them into you know, I think those channels are now in a hundred and forty countries. Um. Yeah, No, it's really just an unusual,

interesting coincidence. How do you find these international films to watch? Is it Netflix or no? I mean, like I like doing it the old classical way, which is of going into a theater, locking yourself in, you know, for two hours, without without any access to technology, and like seeing it and the other passion. And you can do that in New York. There's plenty of into national you know, like in fact exactly so. And also like some of the film festivals, like I've watched I was the New York

Film Festival in October. I think I watched a dozen movies playing at Lincoln Center at one of the most you know, spectacular places to watch a movie, the Alice Tully Hall I find. I mean, I just love sitting in or the water read theater, so, um, I really like doing that, and going to film festivals. I think

it's a great way of of doing that. So, like I mean to tell you right earlier this year, I've been to Venice, Can I've been to these so I think, you know, like I find it fascinated with film festivals. And in in New York, of course you have two film festivals which are great. The New York Film Festival I think is like absolutely brilliant, and then at a

smaller level we have the Tribeca in April. Yeah, so I'd think that watching going to film festivals, watching some international cinema, learning about the social fabric of another country through that. And of course European cinema is just lifestyle voyeurism, right, I mean you could just watch any europe Insured and the setting is so spectacular, and you know, like the mannerisms are as such which as you know, where you know, which are captured so well on camera that it's a

great fund to what such movies that's really really interesting. Um. So in the last few minutes I have you for let me ask you what has changed about the emerging markets, Um, since you began following them, you know, twenty years ago. Well, they become much more sort of structured now. I mean when I started twenty years ago, it was a bit of a cowboy land, which more frontier than imagining exactly,

you know, like the rules weren't entirely cleared. How you got research was much more unstructured, and uh, you know, like and then you had all sorts of corporate governance issues in these markets. So I think it's that's become a lot better now over time, and the integration is much more real now. So I'd say that there's been a big improvement in terms of as far as emerging markets are concerned. But I still find traveling is very useful.

But the big change, I'd say is the fact that it's a lot more structured now compared to the cowboy days of twenty five years ago when if I started looking at these countries and actually you answered my, uh the question I was gonna ask you, what do you do to relax outside of the office biographies and film festivals. Um, let's jump to the last two questions. So you have to work with a lot of people right out of school,

young people at Morgan Stanley. What sort of advice do you give to millennials or someone at the start of their career who say, Hey, I'm interested in emerging market uh, investing? Um, you know, like I'm a bit st if. I find it a bit presumptuous to give advice to people, because I find that each one to their own. I mean I never followed anyone's advice while growing up, to be honest with you, because I was at a very young age, I got very interested in writing and investing and just

followed my passion. And sometimes at work sometimes that doesn't work. And uh, I was about to come here in the U s to do my PhD. And someone from Morgan Stanley who liked my work while hiring me, basically told me that you want to study or do you want to make money? I want to make money And I didn't study more, and I think I learned more by sort of working real time. But it works for some, it doesn't work for the others. So I feel it

presumptuous to give advice. But I think very important to know that there is no one size fits all formula. There is no manthra of a success that you've got to do this and that will happen. But but you've got to find out who you are and sort of follow that passion. And and for me, my entire sort of thing is that you've got to sort of Um, there's a line that someone told me very early on which I followed to, which is that live life in

parallel and not in series. You know, which is that, like so many people at a young age left to plan, I'll do this five years from now, I'll put the soft ten years from now. Hey, if you can do it today, do it right. Who knows what's gonna happen for you. Yeah, so i'd say that, like, at least for happiness, that's important. Now. Whether that's a success formula, I don't know, but I think it makes you happier to live life in parallel it in series. Well, Well,

that's very humble of you to say. Who am I to say? You have achieved a certain degree of professional success, which I think certainly is why someone might be asking you for advice. But I like your answer. I think that's a very interesting answer. And our final question, Um, what is it that you know about emerging markets today that you wish you knew twenty years ago? As I said that emerging markets have really evolved a lot over

over time. But what I'm really happy with is that at least have come up with now a structure of thinking about them, these pain rules, right, I mean, like because like often what happened when we speak about countries. It's not just true of emerging but even though of the U S or other developed countries, is that we have these unstructured water cooler type conversations, or this country looks good because of this, this country looks bad because

I don't like that leader or something like that. I think what I'm really happy about is that at least I've been able to come up with Okay, these are the ten things you should really look at, and this is how you should look so money ball for emerging markets, the way of quantifying what's going on instead of the old myths and heuristics. Yeah, but I'm saying yeah, and like also of eliminating as to what does not matter, Like you know all these myths that education really matters

for economic growth. Yeah, but the evidence is very mixed that the time it takes for education to move. The needle for ecnomic growth is much longer than you and I can sort of be here for it's better than not. But you're not gonna wait twenty years, thirty years to have to hang my hat on that. And it's a chicken g story as to which one comes first, is it good education or is it economic success, which then leads to the funding education. I mean for good education.

So I'd say that that is what I'd say that I wish i'd known back then, I think, But but that's the process of evolution, which that you just learned these things over time. But the fact that we at least have ten things, and I'm very pleased to share that with the rest of the world so that I can have this debate about how to improve the system is what I feel good about. So if people want to find your work, where's the best place for them

to look for you? We we can at least mention the two books break Out Nation and Rise and Full of Nations. I assume most of the writing you do at Morgan Stanley is behind a research firewall. Is that correct? I mean, like I'm on the investing site, so I'm on the investment management site. So I don't write research for external good but what I do write our op eds very frequently, so Wall Street Journal ft FT, New York Times UH and foreign affairs are typically couldn't get

into any good publication. But you're slumming it. So i'd say that you know like that unfortunately to write for these uh publications. Okay, so you're very so between Google and Amazon, you're very findable, I think so, Rushier, thank you for being so generous with your time. We have been speaking with Morgan Stanley's Rushier Sharma. UH. If you enjoy this conversation, be sure and look up an inch or down an inch on Apple iTunes and you could see the other hundred and twelve or so uh such

conversations that we have had in the past. I would be remiss if I did not thank Uh. Taylor Riggs are ahead of UM. I'm gonna do that again. Let me let me see if I can get Taylor's name correctly. I would be remiss if I did not thank Taylor Riggs, who is our book or extraordinaire and and chases down these folks UH for me in order to bring them here into the studio and share their thoughts with you. And Michael Batnick, our head of research, who helps me

prepare all these insightful, thoughtful questions. Uh. We love your comments and feedbacks and we have a specific feedbacks. What's feedbacks? Feedback be sure and right to us at our dedicated email address, m I B Podcast at Bloomberg dot net. You've been listening to Masters in Business on Bloomberg Radio,

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