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Ruchir Sharma

lines on the record: 122
first: 2016-11-18
most recent: 2016-11-18
sittings or episodes: 1
sources: podcast

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“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 1.52%, in the emerging world, bring it down from whatever 5% 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, from a lower base, but lower your growth expectations everywhere. That's the new math for economic success. And you'll be able to identify winners more easily.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, and I'm saying that for the developed world, I'd say even north of 1.5, 2% is fine because we have an anchoring bias, as we call it, which is that we look at what we were growing at the last 20, 30 years and look at the same thing. That's not going to happen again anytime soon. Exactly. And why, right? As a point out, that it's because of demographics have changed. You just can't deliver those economic growth rates anymore. The debt supercycle has ended in most countries. The massive increase in global debt we saw between 1980 to 2008 has come to a stall, barring maybe Odina, and they're facing problems because of that. But generally it's come to a stall. And then you have an era of deglobalization, which the nations are turning more inward. 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 1950 and 2008 was a very exceptional period.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, exactly. And even the UI, it's facing all sorts of problems just now and its financial sector is quite brittle. 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, it seems to me that a lot of the core European countries are becoming more sort of integrated rather than turning skeptical after the referendum in places such as UK. So I'd 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 to understand the words.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's any problem in the world, people are still fleeing to the US dollar, right? So, because this is still the reserve currency of the world, there's no other currency out there out to challenge the US dollar.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Much bleaker future than they did in the past. So that's the bleak side, the dark side of the world. On the positive side, I think that in my book, of course, I talk 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 there. Eastern Europe, I think it's cleaned up its act a lot. Poland, Czech, 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 in the developed world, too, countries like 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 how economic growth has been so low. This is the weakest economic recovery in 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.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“The whole continent. Yes. I think that in a deglobalizing world, countries such as Korea, Taiwan, even Hong Kong, Singapore, all these countries which relied much more on external demand to grow. I think that these countries face a...”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I'm still concerned about Turkey because I think that in Turkey the interest rates in the US as they go up, they're very dependent on foreign capital. So Turkey is still a country that I'm concerned about. I think that's South Africa. Africa. I think the African growth story in many parts is over. Really? You know, something that we were all sort of looking to Africa rising. Now there 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.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And government, exactly. So US debt levels are almost similar to China, but the difference is twofold here. One, that the increase in China's debt has been much sharper than anything that the United States has seen. And two, 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 debt levels are as high as the United States today, as a share of its economy, even though the Chinese per capita income, its wealth, is a fraction of that of the United States.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Their debt to GDP reduces. I think it depends how you can calculate it, but somewhere between 250 to 300% as a share of the GDP.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“That was one of the questions. Yeah, exactly. So some countries are deleveraging, including countries such as Brazil and Russia possibly. And even in the United States, the government debts going up and the private sector side, the debt levels have at least stabilized. They're not going up anymore, particularly on the household and 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 China's”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“For the rest of the world. Yeah, but having said that, I think that there is a sort of big difference here, which is that debt levels in the rest of the world have stopped going up much. And if anything,”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Just hasn't hit yet. Yeah, yeah. And even if it doesn't hit in a big crisis blow, it's like an insidious sort of trend, which is that it sort of eats away slowly at the growth rate over time. So I think China is...”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think that if you look, I mean, I think that it's easy to start with least attractive. I still find that China is the biggest risk in the emerging world. Really? Yeah. Because of the kiss of debt that we spoke about earlier.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, because I think there are possibly more inefficiencies that you 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.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“No, I think that in terms of that, this is a broad trend that we're seeing across the world, which is exactly, which is a move towards passive, away from active kind of investing. And my point is that in the emerging world especially, like I can argue that that's wrong and even in the developed world, but in the emerging world in particular, that's the wrong approach is because the differences are so sharp. And the execution is also much more difficult just to buy stuff which is passive. And then over time, emerging market fund managers do tend to outperform more than their developed market peers. So I think that.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, that's some countries. Yeah, that's a common problem, but more so in 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 XYZ 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 country's economic growth rate going forward.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, you can argue that in terms of it. Now, in some of the countries, the reform requirement may be something very different in terms of what needs to be done. Like in the case of Indonesia, there was a huge amount of a black economy, unaccounted economy, how to bring that back into the mainstream. Isn't that a”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, like in the case of India today, it's the banking system, which is a complete mess. So you need a cleanup of the banking system, much more sort of private sector involvement in it, because today the banking system is so dominated by public sector or government-owned banks. So that's like an area of reform as far as they need to look at a little bit.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think that 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 their per capita income tends 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 a function.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's 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.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Complete mess, but having said that in the post Dilma world, after she was impeached, and you have a new administration out there, the kind of reforms that are taking place are quite encouraging. Now, it's a terrible situation still, but at the margin.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“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 is that you're seeing the return of economic orthodoxy in Latin America. Names and countries. Yeah, for example, you take the classic case of Brazil that in Brazil's case, that country had really sort of gone from being the star of the emerging world last decade to being the poster child of what all is wrong with the entire emerging world.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, in a direction you get some similarity. Overlaid on this when you get such easy monetary policy, you end up getting all these financial excesses”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, there are parts of it which are that too. So that's the problem in 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 market's performance for the last 20, 30 years.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, in terms of the domestic market, yeah, in terms of deeper, I mean, what I mean is more well regulated compared to what we have in China and less susceptible to the booms and busts that the Chinese stock market has. I mean, the China stock market is very deep in terms of the amount of liquidity and turnover. That is huge in China.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“But I'm seeing 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.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“For the best couple of years. I mean, a wild run, which is unprecedented, right? I mean, as one sort of wise person put it, that it's like a casino without rules, right? What about this?”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“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.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“But the economy is X growth. I mean, like, it's now flat, flat at best 1 to 2% type economic growth rate from Russia for the foreseeable future.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, and then what's happening also is the fact that the investment environment in 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 low oil 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.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, 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-ray. Growth, which is that the best you can hope out of Russia for economic growth rates now is 1 or 2%. This is not an emerging market type growth rate that you would think. Its demographics are terribly against it.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“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 6 to 7 percent. That target is set with only one objective, which is in 2010, they decided we have to double our economic size by the end of the decade. And so the math that they did was that we need a growth of 8% first, then 7%, then 6% 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 should worry us. At the peak of the US housing bubble in 2007, it was taking $3 of debt to create a dollar of GDP growth in the United States. Today in China, it's taking $4 of debt to create a dollar of GDP growth in that country. That's been the explosion in debt in China this decade.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Across the world You've got 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 a economic system, which they come up with a growth rate and then just want to achieve that no matter what.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, that's my point, which is that it's that ambition to grow at a rate which is no longer feasible or no longer sustainable. So till 2008, until the global financial crisis, China's debt situation was relatively stable. So, you know, China's debt was increasing, but increasing in line with the underlying economic growth rate. So it was relatively stable.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, because I've dedicated 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 too 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 got 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. There are bound to be bad loans. A lot of malinvestment in the economy. And that's going to come back to haunt that economy. And China, the debt binge that China has been on this decade is unprecedented.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“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, and especially in a world where passive investing is on the rise and people just want to sort of, okay, emerging markets are doing well and they just put something in an ETF blindly and sort of get on with it. I think that it's become easy to generate. But yeah, over time, the differences are huge. And the performance of countries is very stark in terms of 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 an Indonesia which have done much better. You have countries like India which are still sort of growing. China's economic prospects are changing for the worse very quickly. So let's address.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Exactly. Like, it's a huge help to start with, especially if you're a small to mid-sized country. And, you know, Singapore, Hong Kong in the past have shown that. Having said that, 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 that the world is now beginning to change on that it's no longer that easy to export your way to prosperity and being in the right geographical sweet spot is still helpful, but not as helpful as it used to be when the world was globalized.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, I think that's something 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?”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so what I mentioned there is that if you look at the history of economic development countries, particularly the mid to small countries, have done well when they are in the right trade routes. So if you have 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. It's there in the trade routes south of China and in terms of how Vietnam is doing. Sri 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.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“It has not been able to correct that despite the very sharp fall in commodity prices. And then you have the case of Erdogan. I mean, here is a leader who seems to have overstayed his welcome in power. When Erdogan 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 power, even if that comes at a major economic cost.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Turkey is the country on which I've chained 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 2013, when Erdogan began to lose the plot, I think that since then I've been much more skeptical on Turkey and remain 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.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, like, Vietnam is a country that I'm optimistic on in my latest book when I apply the 10 rules Vietnam does come up fairly well.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Emerging market. Not as yet. It's a classification issue, really, which is that the difference is not that much, but it's a classification issue”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Examples, yeah, for example, like in the frontier markets today, you would have countries such as Kazakhstan, or you would have Romania, but the largest ones, you would have are Nigeria, Vietnam.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think the difference between emerging and 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 in and out. Frontier tends to be the next category, which are markets which are slightly off the beaten-down path.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“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 glad you brought that out.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So the book in 2012, 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?”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“But I think you have to understand the sociology as to why it became so popular, which is 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 BRIC captured the four largest emerging markets. Right. That's it. So this was a great marketing acronym. But like all marketing creations, it had a useful net. Exactly. So I think that 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.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Right, at that point in time when I wrote the book, it was really sort of to bust the myth of the brick countries, which is that there was so much hype about the BRIC nations last decade.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's going to be much more difficult, but I think that that is something that we're likely 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 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, 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 19th century right up until the first decade of the 20th century. And then from 1914 onwards, with the outbreak of the First World War, we got a big decline in globalization. which lasted for many decades. So my sort of bet at this point is that deglobalization is here to stay. This is the new buzzword and a multi-year trend, not just like a freak data event.”
2016-11-18 · Masters in Business · Interview With Ruchir Sharma: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source