Iain welcome Vinnie Chrissy. Yeah. Good to see you, too
Why is geopolitics?
Important to investors, you know, it's not always as important as it is right now
usually
Geopolitics is really important for people focused on
Parts of the world that are intrinsically unstable the Middle East
emerging markets cross-border tensions that kind of thing
But right now we're heading through a bus cycle what I call geopolitical recession where the old us-led order is actually
Unwinding in other words, I mean the US is still stable domestically and if we have Trump for another term or not
That's not gonna matter that much to domestic policy
but what happens with the world the
idea that you've got major
trade tensions between the US and all of its major allies and between the two largest economies in the world the US and China you
have
NATO in much weaker condition than it was historically the ability to respond to crises when they emerge after
9/11 after 2008 financial crisis the u.s. Came together the allies came together
even our
Antagonists the Russians after 9/11 supported the u.s. The Chinese after 2008 were constructive in the g20 but today
Next time we have a crisis, you're not gonna see that you're gonna see an unwind and finger-pointing inside the u.s
You're gonna see the Allies much weaker
You're gonna see the Chinese and the Russians taking advantage trying to build new
Architecture or trying to create the case of the Russians more chaos
That's why geopolitics matters
if you look forward over the next 5-10 years the single question that most investors are most
uncertain about in terms of driving
Macro market strategy. It's actually geopolitics
The economic consequences they're from that's right. Exactly
Let's look at some and by the way what you're describing sounds very much
Like I'm we're going to get into it in a little bit g0. That's right. Okay, exactly
Let's take a look at some of the geopolitical type of issues that are out there touch upon a few
You know macro trends that are there and I'm sure we'll weave it into you know, g0 a concept
Globalization a little bit more like D globalization is going on and that's kind of what you're describing
You know to a good extent to well, I mean certainly
People are moving and ideas are moving in capitals moving around the world faster and faster
That's certainly true. And if you want to talk about, you know sort of
early stage industrialization
Oil gas commodities rare earths. I don't see de globalization happening there
I actually see markets continuing to become more integrated, but if you start talking about
Manufactured goods and services there
I see labor becoming less important to supply chain and I see supply chains becoming shorter and
especially after the next economic downturn and
Given the fact that the Chinese are becoming more competitive and they don't have rule of law. I actually see some level of
trajectory
Momentum away from further globalization, but the most important point is the most advanced part of our economy
Which is technology?
chips
5g heart big data the cloud and there we actually see
Globalization literally falling apart. We see two
Completely different competitive systems one being driven by the Chinese the other largely being driven by the Americans and they don't interact
I mean everyone's complaining right now in China that the Americans are trying to get whitter Huawei, which is their major
you know sort of technology company driving 5g, but if you're Amazon or Google
Which are functionally American monopolies in their space, you know
They don't even have access in the world's largest internet market China then that's it. That's not globalization. That's not the world wide web
That's a splinter net and it's completely different from what advocates of globalization and the free market. We're hoping was gonna happen in 21st century
trade wars figuring into all of this
Interconnected with this we can you say well trade wars are a part of this but the Americans and the Chinese
Fundamentally need each other in trade. We want to buy Chinese goods
They want to sell them to us and one of the reasons why Trump despite
Talking about putting tariffs on the remaining three hundred twenty five billion dollars of Chinese exports to the US has been reluctant to do so
Because the our products that American consumers actually buy it's clothing. It's toys it's your iPhone and if he does that
American voters are gonna feel it
so he's very reluctant and that's why despite the fact that there's no
Breakthrough deal as of yet between the American and the Chinese. He's actually put a ceiling on further escalation
so yes, the populism and nationalism that we see not just in the US but in many democracies around the world developed and developing is
leading to some more protectionism
But the fact is that the interconnection of international trade is still a driving force in the driving force there. Yes, there are multilateral agreements
Part of the picture here too disintegrating into bilateral agreements
What do you see the trends are not happening as it's rising with everything that you're describing?
it's very hard for leaders of advanced industrial economies to convince their
Populations that more free trade is good for them
so the average member of the working class in the middle class may see that the markets are doing really well and may see
That the top 10% 1% point 1% have done really well
But to the extent that their wages have been flat for decades now telling them that NAFTA or the trans-pacific partnership
Is good for them doesn't really cut the mustard that's true in the u.s
Bernie Sanders would have opposed the TPP Hillary Clinton was an architect but said she'd have to change it before she pushed it through Congress
Trump of course famously said I'm ripping it up and Obama couldn't get it done. That's also true in Europe
It's true in lots of wealthy democracies interestingly
You've got a lot of populism and nationalism in countries like Mexico and Brazil
But they are working in middle classes have benefited from globalization and they see it
Those are the ones that got the jobs that left the United States and Europe
So even though they are voting in anti-establishment anti-corruption figures
There's no problem promoting free trade and in Mexico the new US Mexico Canada trade agreement
Which is a little bit like NAFTA prime is very popular among pretty much the entire population. Mm-hmm. The you mentioned
corruption
To shift gears a little bit. What about the rise of illiberal democracies?
You have many governments now emerging where you have autocrats at the core
Benefiting from what appears to be superficially a
Democracy, I think you think of Russia in that regard in and other countries, too
they vote the people vote for
So-and-so and there's an operation that seems to be happening within those countries having to do with perhaps
Illicit funds and money and kleptocrats and things of that sort
What's on that well, so it's interesting. First of all, I would not consider Russian a liberal democracy
I would consider them a functional authoritarian regime
There are no meaningful opposition parties in Russia, the Russian government controls all the media that matters
And as a consequence if the Russian people wanted to potentially vote for someone other than Putin
They really don't have the opportunity to in the case of Turkey
You have a democracy with?
relatively weak democratic institutions and a would-be autocrat former prime minister now President Erdogan
Trying to dismantle that system so that he can run it right and he's family that's really interested
Like he's tried really hard and Lord knows there's a lot of corruption around his family and around his you know
Sort of business Network and yet there was an attempted coup against him it failed and yet, you know
They couldn't get his own guy as the mayor of Istanbul despite two tries
two bites at the Apple in their elections and
Some of his most important former supporters now leaving his a.k party and they're developing alternative political
Movements in the same space the center-right to go against him in other words. I think we're seeing the tipping point
Away from her Diwan. I don't think he's gonna be running that country and another sort of five to ten years
But we're not seeing the tipping point of autocrats though. Are we no, no, maybe him
autocrats you're in there
I mean autocrats are becoming stronger in many of their countries because number one you don't have this
cohesive
Free world order that's actively promoting human rights and democracy. They're not leading by example number two
technology is increasingly empowering autocrats to surveil their populations and
Sort of nudge their behave you're in two ways that are more stabilizing for that political regime
But my point on Turkey, is that for those in the United States that believe? Oh my god if Trump gets a second term
we're no longer gonna be a democracy the facts believe that when Trump says I
Want to change the way we think about the census he fails he has to back away when Trump says I don't like the way
the feds behaving I don't want an independent central bank Jay Powell says if he tells me to quit I'm not leaving I mean
So far two and a half years of Trump, he's divided the country an awful lot
He's caused a lot of internal angst and even some real anger
But he's not actually done anything to the institutions and I think that's really important and speaking of institutions
There seems to be a considerable amount of faith in the institution's take for example
central banks many investors
They go to the central banks
don't fight the Fed they believe that the central bank is going to be there and it will be the
Savior of the economy. Is there a little bit too much faith in institutions?
I mean, I don't think that the central bank is the savior of the economy
I think that you have a lot of concerns that a lot of people are not benefiting from the economy and ultimately
Economies are built on people and when you have an environment where a lot of those people are left out and are no longer
viable or vital to that
They're no longer to be and you don't measure their their inputs
um, they get angry and that undermines the system so
You know capitalism doesn't work for people that don't have capital and fundamentally. Most Americans today don't have capital therefore
They're oriented towards things other than capitalism
So I I think that if you want to talk about the economy and not just how the markets do it
But the whole economy you're talking about human beings and so central banks cannot be the saviors of that
But I do believe that central banks
Continued to operate largely as they have through the post-war globalization period in other words, they're run mostly by
Technocratic economists who share a skillset. They're very aligned with each other and they are largely
Independent from the political figures that are being elected to run nominally though governments and in that regard
Yeah
I don't I mean they may they're tools to respond to a crisis maybe more limited because interest rates are low right now
So they can't go that far their balance sheet is pretty sighs and their balance sheet is problematic, right?
Although when we talk about the balance sheet everyone talks about sovereign deficits people
Don't talk as much about the assets on the sheet
You know, what are these government's own we do when we invest in corporations
So I don't understand quite why we don't mean I have no problem with deficit spending in the u.s
If we're investing in things that will bring a return long-term like infrastructure and human capital
The problem is we're not
And that makes me feel like the US economy is losing some of its strength
Do you feel though in in terms of institutions writ large?
Okay, the concept of institutions of institutions being there as the as the backstop. Yeah for bad behavior
Yeah, that's the point that I'm trying to get to with that in other words
I had a debate with the with the former president of the Minneapolis Fed
Yep, and the debate that I had with him was about the fact that central bank's actions
backstop bad behavior or you know
What would be perceived as bad behavior by many?
Any any thoughts on a backstop the existing system and the existing system has many excesses
I mean if you're telling me that
Post-2008. We didn't do an awful lot to change the way banking worked. If you tell me that some of capitalism is actually
predatory
And that indeed a lot of special interests particularly in the United States
capture the regulatory process that there's far too much money spent on lobbying and that
congresspeople upon retirement join that and have to position themselves to ensure that they have future well-being and as a consequence are complicit
Those are very significant problems. I would not put them at the feet of the central bank
I put them at the feet of a system that is no longer feeling like a representative democracy
That's a problem you mentioned
in one of your
Writings, I believe it was if not the TED talk
About very tense 10 years between china and russia
What do you mean by very tense? What's the sense of that tension? How far does that tension go?
Well were this 10 year time pinch Ines ascendant rushes in decline?
China's investing not only in its own domestic human capital and infrastructure, but also they are the most strategic with a plan
investing in infrastructure technology outside their country the countries where they're investing the most are their
Eurasian and Asian land masses in other words not America's neighborhood Russia's neighborhood now right now Russia sees China as
useful because they're so angry at the United States and undermining that influence but medium to long term five to ten years the
reality of Chinese economic
Dominance around Russia whose economy is smaller than Canada's right now smaller than Italy's right?
Despite all their military weight that's increasingly going to feel like a threat
and the anti Chinese racism in Russia is real and the
Demographic imbalance with a billion point for Chinese and a lot of Russian land that's largely unpopulated
So it's hard to see that not becoming much more tense in the relatively near future in the relatively near future and belton Road
exacerbates this of course
the youth Alton Road is the Chinese strategy to ensure that all of that money is spent in a way that is
politically leverageable and useful to Beijing wall belts all roads lead to China and
Before we leave the general geopolitical area
How consequential do you think next year's US election is going to be
To the emotional well-being of Americans. It'll be greatly
consequential and I think that matters I mean we're talking about a few hundred million people and they matter to you and I write and
They've been driven completely nuts
By how much they increasingly hate each other within families, right? They're fighting they can't watch cable news
I mean, there's not one narratives not one story. We don't know we stand for as a country anymore
So that's the stir being right, but if you ask me, how much does it matter to policy not that much?
I mean, you know Trump's policies in his first couple years kind of look like Republican policies
I mean he talks about things like building a wall in Mexico in a paper. First of all, we've had a wall before
A little more wall is something most administrations have generally supported but he hasn't really changed
Immigration policy fundamentally most of what he's done
It's consequential lower corporate taxation regulatory rollback more limited enforcement
His judicial appointees his fet appointees
Not the people he's talked about the one he's actually appointed and Marco Rubio would have done the same thing
Jim would have done the same thing
So I think the only thing Trump's done that's really surprising as a new Republican because he wasn't for long as you know
Is probably his deficit spending which feels more Democrat like though. It's heavily focused on national security and defense. That's a more Republican supportive
But you know, it's really his lack of character. It's really his divisive
Nostrovia and force them to attempt okis only on him and on other things
That's where Trump has an impact on the national psyche of the United States
But on the actual function of the American economy virtually nothing. I'm wonder what the feedback loop will be
We'll find out we'll find out how the whole thing plays out G zero as a concept
I just want to read from your TED talk which by the way, I thought was excellent
Thank you a fundamental truth of the G zero. Is that even though the u.s. Is not in decline?
it is getting objectively harder for the Americans to impose their will even have great influence on the
Global order right when I when I read this and I heard you speak it it may be think of Joseph
Nine.hoorah, power guy soft power guy exactly. Yeah exactly. That's part of the equation. That doesn't get talked a whole lot about
Thoughts on on how that end and elaborate on into the whole g0
Concept if you would so the G zero is the absence of global leadership
We talk about the g7 the g20 these constellations of major global leaders
Implying that there is some level of order in post-world War two
There was an order imposed by the US with its allies
American capital American standards American
Values that goddess the United Nations a goddess the World Trade Organization of Ghana the IMF got a the World Bank
That was this
Liberal order with a lot of hypocrisy and a lot of marginal countries that didn't matter economically weren't a part of it in a Rwanda
Experience genocide despite the liberal order right? We get all of that but still in terms of the way
Globalization functioned there was such an order that order is now
Unwinding and it's unwinding for two reasons first because the United States and advanced liberal democracies writ large
increasingly their populations see their own institutions as illegitimate and not representing them the put the
Establishment in the political field the mainstream media to CEOs the bankers the the public intellectuals all of them and at the same time
The world's second largest soon-to-be largest economy. The Chinese are building an alternative
They don't want to align
With the standards and values of the Americans their state capitalist their authoritarian put those two things together you get a G zero
That's where we are, right
And so that means that even though the United States has the dominant global currency
Even though the United States is now the world's largest energy producer
Even though the u.s
Is the largest food producer and even though we are?
Geopolitically in a great part of the world without a lot of conflict lot of arms races in our region
The fact is that we're losing a lot of influence globally. That is a reality
We're more divided our allies a weaker and more divided and the Chinese are building an alternative. You know what you're talking 2016 we seeded
Everything that has happened
You know since with the election here and I think it was I think actually your your your TED talk was prior to brexit
That's also that's right Rex
I just really win it when you saw the geopolitical
Recession really emerge right and if you want to look back and say when did the shoe start dropping the brexit referendum the Italian?
Referendum the u.s. Elections and then you started to really see the unwind but but the structural problems were all there
They predated Trump Trump was not the problem Trump was the symptom. Yeah, right. Yeah the manifestation of it which by the way in
2013 I'm really struck by that. Yeah, the the title of your book
Of your ten books, I guess it is every nation for itself what happens when no one leads the world
That sounds like a title that you know, that's G zero. That's Jesus
That's what I first came up with the G zero concept in 2011 in an article. I wrote at foreign affairs
It's the only time in my life I've ever actually
front-run
A book with an article, huh? And that was by over a year
And the reason I did that is because it was so clear. This was gonna happen
I kind of assumed that other people would be picking up on it. I want to be out there fast
It turned out took a long time
A lot of Americans just weren't ready
For this concept because foreign policy isn't really in the psyche of a lot of Americans. Most Americans don't travel
We just don't think it matters
It became a massive bestseller in Japan because the Japanese were much more concerned about the Americans don't care as much about us
Oh my god. We got the over this rising China
Like they really felt it because they weren't on the sharp end of the story. Yeah, and that then becomes
The expression in the form of g0 media. Yes, okay
Tell us about g0 media people can subscribe to what I do signal
Excellent commentary. That's there. You have a segment. Also the one I have a show six
They say you have a show jib. The word zero world was on PBS nationally
Yeah, if you would ask me five years ago, I didn't think I'd be doing this. I'm doing this because I see that
mainstream media is
Dividing our country and is dividing the world people are watching news that they like
Hmm and it's if you're watching CNN or Fox or if you're on social media, and you're a liberal or a conservative
There's virtually no overlap in the news in the information that you're getting on anything
But not just the Muller
Investigation on China on immigration on any major topic that's horrible for our country
And it's not the way it used to be when you had, you know, sort of three networks
but you know the way Facebook works the way Twitter works is you watch you only receive information that you like because that
Maximizes your eyeballs, that's great for consumption. It's great for a consumer
It's horrible for citizenship and I started this g0 media
Company because I felt like I mean, I've got almost 5 million followers
It's you know, it's more than you know, it's more than nothing and I felt like that kind of platform
I'm sort of obliged to put information out there that can bring people together and
Isn't just serving the needs of the point 1 percent of the population
That can pay a lot of money and goes to Davos which is what the firm was doing when I first started
But how do you find that that?
Nonpartisan ground
Where it doesn't come across as a tilt in one direction or another or do you provide?
Left and right views and and let you know. I mean I interview everybody in the last few months
I've had leaders from all over the world that have you know
The whole political spectrum and by the way left and right in the United States is like this narrow compared to the global spectrum
right, but in the United States, I mean
I've had Rand Paul on the right and I've had you know sort of Cory Booker on the left and they're fairly
Sharp on both sides got some folks in the middle too. Um, but it's not about left or right for me
It's just about being authentic. I've never been a part of a political party which you know sounds kind of
Trendy today when people are leaving parties, but you know, I when I was 18, I I never wanted to join one
I'm a political scientist
I've traveled to almost 100 countries when you spend a lot of time outside the US you realize that
You know different people depending on how they grew up have different answers not because those different answers are right or wrong
But because you know, it comes from your cultural context your national life experiences
You're being brought up in the projects in my case as opposed to you know, sort of, you know of being in Greenwich
Connecticut
and and I think that when you're honest about that when you tell people I'm just gonna call him like I see him I mean
Hi, I don't think Trump has the character to be fit for office
But I also think he's had pursued a number of policies that personally I think
Have been smart and I'm willing Trump doesn't drive me crazy, right?
He doesn't I?
I'll say this to you
I feel like on the one hand like Trump occupies this position of incredible privilege
He is president of the US and he gets away with things that
No one would get away with in this country says things that you'd be fired for in my firm or other firms, right?
And yet he's also treated unfairly
He is if you look at the media they beat up on him on everything I whether or not he's got a good idea
He's right. Everything he does is horrible everything. He doesn't evil. Both of those things are true
Mm-hmm, and and I think that as long as you're authentic, I think people are willing to cut you a lot of slack
They're willing to disagree with you on things and still listen to you
If they think you're not full of crap, and I'd like to believe that over 21 years since I started my firm
I've had a track record of being authentic with people and I think that g0 media is the expression of that to the public
It's gonna be really really interesting because this is a grand experiment that you're engaged in
It's along the lines of something that everything about angles and answers
And that there are people at 10 to 1
to get the angle on something you John something and I knew someone else was really looking for the answer and it sounds like you're
more on that latter category the providing of that answer and then however you want to
Take advantage of that or utilize it and that becomes something that that's up to the person
yeah, I mean, you know, I think it's online my pin tweet actually says
If you're not following people
that you don't like agree you're doing it wrong, and I'm here to help right and and I'm I mean just
Yesterday I saw Glenn Greenwald and Ben Shapiro
Both posting stuff in response to my tweets in a favorable way, right? That's fairly significant. I liked seeing stuff like that
I liked seeing that I can put things out there that people will engage across the spectrum
I'd like to see more of it everything to have that communication going last area touch on with you
This is a world that is very complex. Okay, and
You're a person who really covers a lot of ground an awful lot of ground now
Investment professionals many of whom watch this program that they have to cover a lot of ground too many of them
Unfortunately distilled down to certain heuristics and inputs into you know, this kind of cash flow models and stuff like that
How do you manage data? How do you discriminate how do you know where to?
Narrow the focus what what gets more of a priority versus something else
It's almost like, you know, like a career advice sort of thing from there for people out of one's heart
I mean look, I'm a man. I fundamentally I started I mean you do sleep. Oh, yeah. Yeah
I mean, I feel like balance is critical to this stuff. I mean I take proper vacations I sleep. I don't do work dinners
I work out every morning, but that's I mean that's just to be healthy and a job that's not about doing analysis. That's anything
But in terms of analysis I started off as a country
Analyst as a region specialists an area specialist. I I speak Russian. I've lived in the former Soviet for three years
That's why the firm is called Eurasia group because back in the 90s. That's what I actually knew as
We became more global covering emerging markets in the whole world
It wasn't like I developed different languages in different area studies specializations
I started hiring people and those people in turn were providing data that you know
I could actually carry with me and when I travel to those countries first
I would bring those analyst with me and now increasingly we have offices in those countries
So scale matters being able to hire and train good people over time
I mean I look at former secretaries of state who have fantastic teams and access to information
And then they leave and they've got two people working for them. They can't stay current, right?
so first you need to have a group that's all rowing in the same direction that
understands the
methodologies and they're working and they're sharing information and you need to have a way to filter that and you'd have people that are actually
And you need to travel the hardest part of my job and the part that makes me sleep less
Is I'm on the road half of the time because I don't think you can really cover the world
Unless you go into those countries and meeting those people you have to immerse yourself in those countries and just go into Davos for five
Days, whether all in a bubble doesn't cut it you really have to go to where they are
You have to do - time to do the time and expend the energy and all
Maybe it could be a topic of the next book
It's not that my actual expertise, okay great. Good evening
