Parallax View : New Lines of Insight

With Jim Rogers

Jim Rogers has become an internationally renowned personality. Guest Professor at Columbia University Graduate School of Business, TV Financial New Commentator, co-founder of the Quantum Fund, and most notably his books on Investing, the most recent being, Adventure Capitalist, which he calls his Millennium Adventure. Reared in Alabama but living in NYC, Jim is a true universal thinker.

I recently met with Jim in NYC. Having worked in Asia and other parts of the world, I found his viewpoints like going home. I miss the global thinking and optimism of the Year 2000 Global New Year party where in Hong Kong we welcome in the Cyber Century. Here is the essence of our conversation—I suggest you get the book.

Even though the title states it’s about investing, for supply chain folks, it will resonate. And listen to Jim’s comments with an ole Alabama twang!

ChainLink: The world seems to be changing so much since you started out on your journey in 1999.

Jim: Not really, Ann. National empires of the past are breaking apart. American influence is waning. We just don’t like to recognize it. Our military presence is not making friends. These countries don’t want outside influence. They are really looking for localization, working with their own customs, languages, issues they can relate to and understand. It happened in the old USSR. That’s why we have Uzbekistan, Mongolia, and the former Yugoslavia, even East Timor—all those countries trying to reach their own self-determination.

ChainLink: What do you see the future like from a global perspective?

Jim: Japan is still in trouble. Who is going to pay all that internal debt?

ChainLink: How about Mexico?

Jim: The Mexican economy is much too dependent on oil. 38% of the government revenue comes from oil. Since they sell most of it to the US, that is a short term (high). The problem is, their oil reserves are down to 50% in the past few years. Which means their economy is in trouble because they don’t have a balanced industrial base (think Venezuela).

ChainLink: They are losing too much of their manufacturing capacity to Asia.

Jim: They need to find new industries—now. Their youth is the future.

ChainLink: Yes, I have met many progressive young Mexicans... they will be the future.

Jim: But they are leaving the country; they are coming here. Relying on the US is not the way to save your country.

ChainLink: Other countries, besides China…everybody knows about China. What’s beyond, say, 5 years out? Where would you, say, put a manufacturing plant?

Jim: Myanmar and Vietnam. Myanmar has a disciplined deeply religious population. It’s not like the press would have you believe…human rights. In fact, even in China, we saw everywhere people going to church, temples etc. They didn’t feel persecuted. Vietnam, the people are so hardworking and eager to work. Oh, and did I say Turkey. Let’s not forget Turkey. They don’t just have manufacturing; they have a sustainable market, cheap labor, but a real market and also ease of doing business. They don’t get enough respect from Europe. They are a very undervalued country.

ChainLink: In reading your book, I felt very unhappy about Africa. Are we just going to continue to ignore them, and let them all kill each other?

Jim: American, in fact European as well, policies there are all wrong. In the African countries we went to, we met very hardworking people. But the kind of help we give them is all wrong. It is actually destroying any small industries from getting started— like farming, clothing etc. (Read Jim’s book for some startling comments about Africa.) But, no, no, I am not saying that industry should just run in there. Government and the NGOs have got to get out of there.

Going home…

ChainLink: Speaking of the government. Can you give us your view of US government policies?

Jim: The tax code has got to change. Our tax codes are way too complex. We need to reduce taxes and free up capital for investing. The internal revenue service is the most inefficient branch of government. The biggest problem, though, is that the tax code penalizes savings. Some of the world’s great economies have gotten that way because of how much their people saved and invested. In China, the average rate is about 30%, and look where their economy is going! Americans are not saving and investing. They are creating personal debt to the tune of $1.7. Sooner or later that house of credit cards will come down!

ChainLink: But, about business...

Jim: This is about business. And for your readers I’d say the that most interesting idea in Washington right now is the proposal to eliminate tariffs on all manufactured goods and to stop taxing savings and investing.

ChainLink: But doesn’t that make American goods and manufacturing in America even less attractive?

Jim: Incentives don’t work. Many states have tried that, to entice manufacturing. That was just giving away the state. This can’t be a substitute for working on being competitive. Reduce the cost of production; pull up your socks and start competing with the rest of the world on an even playing field! You have to either beat Asian prices or give it up! We are not completely hopeless here. We have to face up to true global competition.

You know, another reason we are losing our manufacuring base is because of a lack of skilled labour. Nobody wants to face that. Our educational system is in bad shape.

At what cost…

ChainLink: My readers are supply chain people, and they actually deal with currency issues daily; the cost of transportation and supplies fluctuate. The cost of goods sold.... so what about issues with the US currency and Chinese currency. The US is pressuring China not to peg against the US currency. But why should the Chinese listen?

Jim: China will have to create a convertible currency. It is part of the requirements of the WTO. When that happens, their currency value will naturally be set by the currency markets. If I could, I would be buying now. China’s currency is going to rise. Currency like the Swiss franc or the yen are in better shape than the US dollar. I own them, though I don’t have a whole lot of confidence in them either. It’s in a dangerous habit of manipulating your currency to compete in the world’s markets.

ChainLink: So, will that help US goods then?

Jim: (Shaking his head) China’s currency could rise three times and they would still be a bargain.

ChainLink: What about the British Pound or Euros? I own Euros. They seem to keep going up.

Jim: It certainly is stronger than the US, and most of the European nations have a balance of trade surplus and are creditors, not debtors. It’s an alternative to the US dollar. One day the world may stop using the US dollar as the world’s currency and switch to the Euro. Though I am no fan of that either. Many of the countries in the Union don’t run a tight ship, and that could rob the Union of significant strength.

The real world…

ChainLink: Wow! I’m not sure whether I am depressed, angry or excited about getting on a plane.

Jim: Ann, there is always a phoenix rising. Once the sun never set on the British Empire! Who will it be in the 21st century? My money is on China.

ChainLink: So, Jim, what would you advise me, say, if I were a VP of Strategy?

Jim: If you want to make money with China, find things to sell to China. It can’t be things like electronics. They’ve copied all that already. Think about a growing industrial society… things they can’t make or can’t get. They need raw materials: metals, iron ore and steel, even petroleum. Think about the demographics of a society in change. There is a shortage of women there (regular theme of Jim’s). What can be sold to a growing power market?

ChainLink: Any last bits of wisdom?

Jim: It really saddens me to think how little Americans—and American politicians—know about the world. You will find virtually no reporting on what is happening in the rest of the world by the American news media. Only when there is a violent outbreak. To get a broader view of what is happening in the world, read and listen to overseas broadcasts like Radio China and, of course, the BBC. And learn to speak Mandarin!

Xièxie, Jim!

Jim can be reached by clicking here.