Predicting Prosperity Part II

Last week we discussed some of the trends which shaped history, and how technology and geographical location played a role. Today we talk about what we think are some of the most important factors to consider in PREDICTING prosperity going forward (crystal balls be damned).

I make a living without the need to be located in any specific country, and am not alone as more and more join the ranks of the “Cyber Entrepreneur Movement.” We’re constantly finding more and more people who are breaking the shackles of locality and choosing where to live, run their businesses and spend their time. Whatever business you’re involved in ask yourself this question right now. Do I need to be any particular place to conduct my current business, and if so to what extent? I think you’ll find that much of what you do, can quite easily be done remotely.

I challenge readers to take an extended “vacation” and continue running their business. You’ve likely stored your life on flash sticks, cloud computing and HDD drives, now rent your home out, store all the stuff you think you really need someplace – you can always pay an arsonist to torch it later, and go test it out. You might be surprised.

Moving up the scale from individuals let’s consider some of the fastest growing companies in the world right now. Microsoft, Apple, Salesforce.com, Pegasystems, Amazon.com, Ebix…

Now take a step back and think of the industrial revolution. The world’s wealth was largely concentrated in fixed assets. The mines, railroads and factories represented the core wealth of the companies controlling them. The huge disadvantage to this was that fixed assets can be commandeered by “gangs” and held hostage. It is therefore no surprise that the nation states (aka “gangs”) have become as powerful as they are today, or that labour unions were as successful in this age as they were.

Fast forward to today and look at the companies I just mentioned above. The wealth for these lie in their IP, not in fixed assets. Any of these companies can resist “gangs” since their assets cannot be easily seized and controlled. Treat them harshly and they’ll simply go to where the grass is greener, just as Amazon.com did recently or Kenneth Dart did some years ago. As “V” so aptly puts it…”Ideas are bulletproof”.

This is a very powerful trend which grows in intensity by the day with the only thing stopping many businessmen and woman from making similar decisions is inertia, xenophobia, naivety and ignorance. I’ve heard the arguments that come from many. “Gee Chris I really want to go live on a beach in Thailand, Punta Del Este, Cancun or Costa Rica, enjoy warm weather, pina colada’s, and stare at the tanned girls in G-strings, but I have kids in school, a giant mortgage, 2 cars, a boat and my wife doesn’t like tanned girls in G-strings”. This reminds me of a saying, “some people make things happen, some watch things happen, while others wonder what has happened”.

So, which countries are likely to enjoy future prosperity? Africa remains resource rich with outlandishly low real estate prices. Will this change? I’m not so sure. There are many reasons for the cheap real estate prices, starting with private property laws, or lack thereof, and including all manner of controls ensuring that even if you manage to profit in Africa you face real difficulties in getting any wealth out of the place. Why put anything in when you can’t take it back out?

Africa is a continent made up of many differing cultures and countries. One of the aspects which “unifies” Africa is the fact that the majority of countries should never exist in their current form at all! They are made up of disparate, warring peoples who hate each other with an intensity not easily understood by foreigners. The roots of this problem lie in the various colonization’s which took place over the course of history. Allow people to trade with one another on their own terms and you get prosperous societies providing value for value. Force them to follow a particular dictum and you get strife, mayhem, and poverty. The Middle East “enjoys” the same situation to a certain extent. Until I see borders being re-drawn along cultural and tribal lines I’m not willing to bet heavily on either of these regions.

Countries that are moving forward or proving up a system include Andorra, Hong Kong, Singapore and though pretty darn risky and early just maybe, Mongolia.

Seriously if I look at places such as Venezuela I have to think you could consume all the drugs at a grateful dead concert and still struggle to screw things up that much.

One thing I believe is certain. Governments as we know them today are on their way out, with the risk reward benefits shifting from coercion to competition. Many will and are fighting this trend tooth and nail while only a very few are embracing it. This is exactly how history would indicate disruptive technologies impact societies, so we should not be surprised. We are in the process right now of this disruption. Its true that there is little talk of this in the mainstream but then what did you expect of the chattering chimpanzees on the idiot box, or our political masters who have a shown a grasp of reality not dissimilar to that of a tapeworm. (Tapeworms don’t have brains)

You can’t have everything unfortunately, so below are a list of factors we believe to be higher on the “must have” scale moving forward:

  • Economic freedom; not to be confused with political freedom which I would argue is not necessary to enjoy prosperity. The masses like political freedom but it’s mostly a fiction easily sold to the hoi polloi.
  • Low taxes and an easily manageable business environment devoid of mindless bureaucracy (OK, we can dream right?).
  • Technological infrastructure. Importantly a lot of infrastructure in terms of power, water, transportation etc actually does not precede growth. The above measures precede the successful development of infrastructure.
  • An easy going lifestyle, fresh air to breathe and good quality locally grown/raised food.
  • Resources can actually be a curse and are not necessary for prosperity. Economic freedom is far more important.

What countries fit this bill?  Hong Kong and Singapore jump readily to mind (although more dependent on outside food sources than we would like).  The United States once ticked all the boxes and more.  It still does, to some measure.  However, we are more concerned with the growing “police state” and a bureaucracy that is expanding at the speed of light.  Unfortunately the US will never default on its debt load which will quite comfortably be repaid thanks to helicopter Ben. The impending turmoil leaves us looking elsewhere.  The US is simply on the wrong trajectory with no indications of it changing course. Europe, a region encumbered with socialist values and riddled with regulations continues down the path of attracting increasing bureaucracy much like a dog to its own vomit. This while a demographic time bomb ticks. We’re not bullish.

We have previously mentioned countries that we ARE bullish on including, but not limited to, MongoliaIndonesia and the Philippines.  There are others, and since we seem to have struck a chord with our readers talking about Mongolia, we will continue to examine the “country” topic going forward, mainly as it applies to economic prosperity, freedom and happiness.

Thanks for reading, let us know your thoughts below, now go and have a great week!

Chris

“Acknowledge the complexity of the world and resist the impression that you easily understand it. People are too quick to accept conventional wisdom, because it sounds basically true and it tends to be reinforced by both their peers and opinion leaders, many of whom have never looked at whether the facts support the received wisdom. It’s a basic fact of life that many things “everybody knows” turn out to be wrong.” — Jim Rogers

 

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Mark
11 years ago

…”some people make things happen, some watch things happen, while others wonder what has happened.”

Should be the frontier mantra!

The problem, of course, is our cultural and educational indoctrination only reenforces the notion of a nanny state, whether that be government entitlements or a “job.”

The only way out is to “cut the knot” and wander around a bit until one finds a frontier environment that strokes the prospecting spirit we all have.

I was surprised that Central and South Americans countries didn’t rate a more bullish sentiment. The demographic and economic trends are quite favorable and there’s much to be said for being able to touch down in Miami within about 8 hours from most anywhere.

Are you concerned about political and judicial stability?

Mark
Mark
11 years ago
Reply to  Mark

Mark,

Good points all.

I live in Uruguay right now. S. America is a very diverse place, and some countries are better than others. I do worry about the politics and the judiciary. As a ‘gringo’, I am at a disadvantage in most S. American countries when it comes to legal disputes. I could give you multiple examples of situations where a foreigner was completely defrauded or extorted by a local, only to see the police and the courts support the local without regard for the facts.

Politics in S. America are volatile. Countries can turn on a dime down here, and often do. Look at Ecuador, Bolivia and recently Peru as examples. Peru should be OK, as Humala seems to be moderating. However, there is a pretty clear move towards socialism in most places. The mayor of Montevideo is a communist. The Uruguayan president, Mujica, has a very sketchy past.

It’s buyer beware no matter where you land up. There is no paradise or perfect place. We need to find happiness within first. At least that’s how I see it.

Matthew
Matthew
11 years ago

Another interesting article. Thank you.

I’m surprised you would put locally grown/raised food up the must have scale. Why not let the countries with the best climates, labour and land masses grow the world’s food and sell it for goods and services they need from other countries more suited to those things (a la Ricardo)?

Having a preference for “local” over “best value” is irrational and, I would have thought, and anathema for you.

I know it’s a small point, but it’s another example of a trend I see too much of; like protectionism and governments trying to pick winners (unsuccessfully and distorting markets).

Mark
Mark
11 years ago
Reply to  Matthew

Matt,

I respectfully disagree. Producing locally is extremely important. Not only does it make zero economic sense (fuel costs) to ship food thousands of miles from where it’s grown, but it also loses a lot of its nutritional value (picked early, unripened, spoilage, fumigation, etc.). Eating locally and organically is not only beneficial economically, but it’s also better for you.

I also think that it’s very important for a country’s domestic security to grow its own food. Some countries cannot grow everything they need, but most can at least grow some staples, and I think that’s very important (and will become more so in the future).

Konrad
Konrad
11 years ago

I would have to agree with Matthew here. If we accept your argument about local food production being important for domestic security than that would apply for a lot of other industries as well. Not sure why you draw a distinction here.

For most countries importing foods makes perfect sense as the climate differences justify it. It’s also not always thousands of miles. Why not let people decide whether to pay for local food (often more expensive, despite your argument about fuel costs) or to choose imorted food.

Also, I don’t completely agree to your comment about organic food. Sure, an advanced rich economy can afford to produce organically, but for countries where it is about survival, organic might not be a great objective. It’s a simple fact that without certain technological advancement (incl. gen. engineered food) certain parts of the world would not be able to grow food.

Mark
Mark
11 years ago
Reply to  Konrad

Konrad,

Thanks for the comments. I love a good debate 😉

I was making the point (I think) that domestic food production is important for a countries security. I still hold to that argument. Singapore is a case in point – lots of great opportunities but the fact that it depends almost 100% on outside sources to feed its people just makes me a little uneasy. I prefer to set up shop where food security is not a question.

I haven’t really experienced a place where the ‘local’ food is more expensive. Take Fiji, Vanuatu, Uruguay, Chile, etc. Imported fruits and veggies are multiples of what you’ll pay from a local farmer or rural farmstand/market. My friend in Vanuatu reminds me of this constantly. It’s the same in Uruguay. Local produce is basically free. Local meats, milk and eggs, same. Now, when I go to buy imported items, look out, as the price is astronomical.

I also have to disagree with you on organics. Poor economies usually produce organically by default, as they can’t afford to buy the fertilizer and pesticides. Agri-business argues that the yields are less with organic. That might be the case in some instances, but not in all. You can point to plenty of places where GE yields are sub-par. Poor farmers cannot afford the overpriced GE seeds and the pesticides/herbicides that those seeds rely on to produce the improved (not reality) yields. Despite the arguments of the ‘scientists’ at Bayer and Monsanto, GE crops have not solved the world’s food problems, nor will they. Instead they have resulted in mono-cropping, contamination of clean genetic lines, and health problems in livestock (and people).

This bologna I keep hearing about global starvation gets my dander up. Global starvation is assured if we continue down the path of GE. The only way to feed the world is to go back to basics, not try to ‘engineer’ our way to productivity. GE crops are still relatively new, and I’m (unfortunately) confident that the true horrors of this ‘technology’ are yet to be realized. We are already seeing mutations in human intestinal bacteria where the (good) organisms in our systems (that are necessary for proper immune function, etc.) are mutating with GE genes (likely from soy). The results are not positive. I avoid GE foods at all costs, and I buy organic whenever I have the choice. I recommend to all my friends/family that they do the same.