My home is in New York and Shanghai. My office is mostly in the Middle East. I teach in Beijing and Cambridge. And I am quite possibly a genius at manipulating flight schedules to ensure regular stop-overs in fun places such as Nice, Paris and Hong Kong.
Global value investing has fully arrived and many of us are now living fully global lives. And it’s fantastic. Really, really fantastic.
As I’m coming up on 10 years of doing this, I thought I would summarize some lessons learned along the way – some of my favorite perks / observations about global investing (and living).
1. “Best-of-breed” economics are pretty fantastic.
My income is Western (i.e. high when compared to say India). My cost structure (furniture, housing, research staff, etc.) however is mostly Chinese (i.e., really, really low). My healthcare is European (i.e., total and complete coverage subsidized by a welfare state). And my investment capital is Middle Eastern (i.e., very stable). Much like the old ERP software systems, I have assembled a best-of-breed combination for my personal and professional operating system.
2. Every year, there are more and more attractive companies to buy.
China, India, Brazil, the GCC, Russia and others have all joined the world economy and they are throwing up a ton of new companies. It turns out the West’s most successful export has been entrepreneurial capitalism. So if you’re spending your days hunting around the world for mispriced good companies, the number out there just keeps getting bigger. The math is really in our favor.
3. The world is, thankfully, hugely biased.
I ask the reader, how comfortable are you with the idea of doing an investment in Africa? How comfortable do you think Chinese investors are when considering deals in India? It turns out cross-border and cross-cultural interactions are rife with psychology. As markets, companies and investors from different parts of the world are increasingly thrown together, we are discovering the new global investment terrain is hugely biased.
And for value investors, with their highly attuned radars for psychology that leads to mispricing, this means lots of opportunities. Forget hunting for mispriced value in the footnotes of a US spin-off; take a look at China-Brazil deals, or the entire continent of Africa. Note: Buffett’s two China investments both had 6-8x returns.
4. The globalization theorists are mostly full of s*** – which is helpful .
The last generation of value investors had the efficient market hypothesis to contend with. Buffett and his peers spent decades discrediting this widely held mostly-false idea. We global value investors have the globalization theorists to contend with. Economists, policy-wonks and other macro-thinkers have long dominated the globalization discussion – proclaiming things such as the world is flat, the inter-connected financial systems are precariously fragile and globalization will kill you and your children (ok, I made the last one up). As a bottom-up value guy, I can find little truth to most of the widely held, top-down macro-theories. And this is quite good. Lots of people believing something untrue helps me.
5. “Knowledge is the adventure that lives at the edge of uncertainty”
Ok. That is a Frank Herbert quote, who was not an investor. But it applies. The world will only go global once. The rise of the other half of the planet, and its collision with the West, is a singular event in human history. Unsurprisingly, it is kicking up all sorts of chaos, uncertainty and confusion. For most, this seismic change appears to fuel a general angst and apprehension. But for the value crowd, our motley crew of ambitious financiers, stubborn analysts, ornery shorts, and generally curious-characters, it is one great big puzzle to be taken apart – and taken advantage of. Far from angst, the uncertainty is both profitable and fascinating.
This, I argue, is global investing’s best perk. In addition to a fun lifestyle and attractive economics, it offers a grand and lifelong adventure in figuring things out.