Most Popular ArticlesJune 30, 2009
The drive to succeed in developing markets
Next, consider the educated youth and emerging middle class in many developing markets - not just China and India, but Indonesia, Malaysia, much of South America and parts of Eastern Europe.
Like many business people who travel to these countries, I am amazed by the work ethic, inventiveness and ambition among the middle class and younger generation. I also see this among the foreign students in the MBA classes I teach at the University of Toronto.
With a move to open markets and lower trade barriers around the globe, these countries will provide existing industries and Western youth with formidable competition. Yes, their urban-rural divide and distribution of wealth create societal tensions, but at a macro level these markets will be a huge driver of global growth.
The resiliency of the American psyche
Some investors outside (and even some within) the U.S. have written-off the US as a fading empire. Certainly America faces lots of issues with reduced consumption levels, increased savings rates, the declining quality of education and healthcare systems, a seemingly permanent underclass and record budget deficits.
Despite this, the U.S is still the Promised Land for the best and brightest from around the world and, social mobility data across generations proves that children are increasingly successful relative to their parents. The US is the closest there is to a pure meritocracy.
Unlike past empires (Great Britain in the nineteenth century, the Soviet Union in the twentieth), American industry has maintained an unrelenting drive to win – with the goal of not just beating competitors, but driving them into the ground. Over time, it has shown the ability to shake off the complacency that comes with success and reinvent itself, deal decisively with bad news and make tough decisions, embrace risk and accept failure.
Yes, the auto industry is one (and not the only) exception, but at the other extreme is the remarkable concentration of the global high tech industry in the United States. Think about how Walmart transformed retailing in much of the world; it’s hard to visualize Walmart emerging anywhere else.
The U.S., like all successful societies, has its share of arrogance and ignorance (fairly or not, this was seen by many outside the U.S. in the last Bush administration) but anyone who underestimates the American capacity for renewal and is making a grave miscalculation.
The bottom line – we need to help clients understand that getting superior returns requires going against the grain and having the foresight, discipline and conviction to first seek out and act on insights that others are missing.
In markets like these, it’s easy for investors to get caught up in the latest pronouncements by the cable-TV oracles. When this comes up in conversation, remind clients that these so-called experts are typically prisoners of convention and anything they tell you they’re also telling millions of others - and the last place you’re likely to find fresh insights is on CNBC.
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