Spotting Risk and Opportunity in Emerging Markets

Author & Political Scientist

Ian Bremmer is the president and founder of Eurasia Group, the leading global political risk research and consulting firm started in 1998. Today, the company has offices in New York, Washington, and London, as well as a network of experts and resources around the world. Eurasia Group provides financial, corporate, and government clients with information and insight on how political developments move markets.

Bremmer created Wall Street's first global political risk index, and has authored several books, including the national bestseller The End of the Free Market: Who Wins the War Between States and Corporations? which details the new global phenomenon of state capitalism and its geopolitical implications. He also wrote The J Curve: A New Way to Understand Why Nations Rise and Fall, which was selected by The Economist as one of the best books of 2006, and The Fat Tail: The Power of Political Knowledge for Strategic Investing. His latest book is Superpower: Three Choices for America's Role in the World

Bremmer is a contributor for the Wall Street Journal and writes "The Call" blog on ForeignPolicy.com; he has also published articles in the Washington Post, the New York Times, Newsweek, Harvard Business Review, and Foreign Affairs. He is a panelist for CNN International's Connect the World and appears regularly on CNBC, Fox News Channel, National Public Radio, and other networks.

Bremmer has a PhD in political science from Stanford University (1994), and was the youngest-ever national fellow at the Hoover Institution. He presently teaches at Columbia University, and has held faculty positions at the EastWest Institute and the World Policy Institute. In 2007, he was named a Young Global Leader of the World Economic Forum. His analysis focuses on global macro political trends and emerging markets, which he defines as "those countries where politics matter at least as much as economics for market outcomes."

Bremmer grew up in Boston, and now lives in New York and Washington, DC.

  • Transcript

TRANSCRIPT

Ian Bremmer: So if you’re a businessman and you’re thinking about how to incorporate political risk in your investment strategies, what do you need to do? First, diversify. Emerging markets are much more unstable than the developed world. If you were investing in the last 40 years and you wanted to just be in the United States or just be in a couple of European countries that was okay, but if you’re investing primarily in emerging markets the outcomes can be radically disparate and very quickly, which means you’re going to have to take a lot more bets to have the same sort of type of risk profile. That’s important to know. It can be difficult to do.

Another point is that you need to be a first mover because in an environment where there is a lot of political risk folks that come in early actually can help shape the environment, the political environment, the regulatory environment, the joint venture environment to be tailored towards them. Second and third movers won’t necessarily benefit from an environment that has been tailored for a guy that invested before you did. That is much more important in places where legal structures and systems are much more opaque and much more fluid than it is in a country like the United States.

And the other thing I would say is that from a broader investor perspective and not looking at it as a businessman is that we’ve talked about emerging markets as if they are in some ways a united asset class. They’re not. The Jasmine Revolution was never going to happen in China. The average Chinese after 30 years of 10% plus state directed growth is happier with their government than the average American is today with the American government. There is a lot of stability in China over the near to medium term. There isn’t in Tunisia. There isn’t in Libya. There isn’t in Thailand. There isn’t in Sri Lanka. There isn’t in Argentina. There are other countries that haven’t blown up yet where there is very strong political instability and yet people that want to invest in emerging markets their funds, the growth funds in your retirement accounts. They say put my money in emerging markets. Frankly, there is going to be a lot of volatility around something like that. To the extent that you have the ability to pick and choose, you want to.


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