HILTON TARRANT: John Mauldin, Financial Expert, New York Times Best-Selling Author, most recently of “Endgame: The End of the Debt Supercycle and How it Changes Everything”, also chairman of Mauldin Economics, President of Millennium Wave Investments and author of a weekly email newsletter called “Thoughts from the Frontline” which I’ve been reading, probably for more than five years now. John welcome.
JOHN MAULDIN: It’s always good to be here with you guys on Moneyweb.
HILTON TARRANT: How would you describe yourself? You describe yourself at the end of “Thoughts from the Frontline” as your humble analyst…is that what you think of yourself as?
JOHN MAULDIN: Yes actually I do. I’m a writer and I started the letter writing about what I found interesting, what I’d read that week and I’ve had the luxury of writing about what I find interesting every week. I don’t have to write about a particular topic, I’m not limited. And so we travel the globe, we talk sometimes about human psychology or medicine or technology, we’ll drill down into economics. This week when I go back to my room I’m going to be talking about emerging markets in general and South Africa in particular so your readers can go see what I’m doing. It’s a free letter, it goes to about a million people so they can get it by going to johnmauldin.com, Mauldin Economics and they can subscribe and be one of my one million closest friends.
HILTON TARRANT: You are no stranger to South Africa, you visit relatively often…
JOHN MAULDIN: It’s one of my favourite countries in the world. I really enjoy it and I know I’m in Johannesburg but I do think Cape Town is one of the most beautiful cities in the world, and Durban out on the beach, the Oyster Box Hotel is just such a civilised way to live…
HILTON TARRANT: John why are you in town this time?
JOHN MAULDIN: I am being hosted on a tour that we just finished by Glacier who sponsored this fabulous event. It was kind of like… it was in March so we were up at 04h30 – 05h00 every morning and going to different city and doing a lot of speeches. But it was quite fun, I got to talk to a lot of people. I find South Africans passionate and really thoughtful and they think through issues, more so than a lot of places I go to.
HILTON TARRANT: When I travel John, I’m appreciative of the perspective that distance brings when you look back at South Africa from say London, or from the US or from Asia…you tend to have a different kind of appreciation of what’s important, and perhaps what’s less important and often we get those two mixed up when we’re living in a country and dealing with the kind of daily news cycle. Your view of South Africa from 10,000 – 20,000km away, given the time that you have visited here over the past what, decade, two decades…
JOHN MAULDIN: …two decades.
HILTON TARRANT: Two decades…you’ve been coming fairly regularly, you have the distance…what do people talk about, what do you think about South Africa?
JOHN MAULDIN: I wrote a piece about seven years ago that was very optimistic because I could see the potential in South Africa. Quite frankly, I think you wasted the last five years. You haven’t moved the ball very much because I think of South Africa as it should be the gateway to Africa. You have such…the infrastructure and management potential…and by infrastructure I mean people, not roads and bridges. People at the end of the day, people are the most important thing. If you look at the South African diaspora what is the one thing that we in the rest of the world find everywhere, entrepreneurs…aggressive, they always are in middle management, management, they’re always running companies, they’re always starting things and that’s what you see in South Africa. You see this entrepreneurial spirit… you see this drive to create, and to grow and to build. It seems to be built into your DNA all up and down levels of society. I was across from the Johannesburg Stock Exchange and there were all these little tables set up with people selling things. People want to do business, they want to grow, they want to expand, they want to build something and they start with where they are. That’s the potential of South Africa and I see that and I go, WOW that’s amazing.
And what I see in the reality is that you set up all these rules to hem these people in. Your biggest talent, your biggest resource is not gold, it’s not diamonds, it’s not even financial services and banks, it’s your people and you need to establish a way to allow your people to grow and that means that you need to change, as all the world does, not just South Africa, change your education system to focus on the future and not on the past. We need to make sure that we level the playing field, not in terms of income, but in terms of opportunity. If you give everyone the same opportunity they will figure out what to do with it. We want to give people the opportunity to create their own lives, to create their own destiny, create their own sense of happiness…that’s important. And if you do that, then the frustrations because he’s got something and I don’t, begin to go away because then it becomes he’s got something and I can get there. If you give people an opportunity, human beings will take advantage of that and they will hire other humans and they’ll cooperate and they’ll work together and that’s how the human experiment develops.
We’re actually living in one of the greatest, maybe the greatest time, in the history of man. We’re living longer as a race, there is less poverty, there is less hunger. More of us have phones, more of us have electricity, more of us are living in a world where we’re beginning to taste a little bit of the abundance. Some are tasting it a great deal more than others, but that’s just the fact of the bigger the pie gets, the bigger the difference between the top and the bottom of the curve is. There’s nothing we can do about that unless you want to shrink the pie. Well that’s not what we want to do, what we want to do is increase the pie, and yes someday in the next 40 or 50 years, we’re going to have the first trillionaire. I don’t even know what a trillion dollars means… it has absolutely no sense to me… what the hell can you do with something like that. but I men somebody’s done something and grown something and built something and hired something and he’s put lots of people to work and he has created something that we all want. And you want to be able to create opportunity all up and down the curve.
We had… you mentioned WhatsApp a little bit before our conversation. This was an immigrant I believe, from the Ukraine who was on welfare in the United States and somebody is putting a billion dollars in his back pocket…
HILTON TARRANT: …a couple more than that…
JOHN MAULDIN: …yes a couple more than that. I mean I don’t know how much of the company he actually had left but that’s not a bad day at the office, and that was in 20 months. But he created something that everybody wanted. I was with a guy the other day here in Johannesburg that 30 years ago started building bathtubs and he ended up building bathtubs and toilets and sinks that all the world wanted and it’s in palaces in Dubai and he’s actually gotten filthy rich building sinks that we clean ourselves in if I can make that kind of pun. It is… what we have to do is get to the place where we’re limited by our imaginations and that’s the only limit. I know that there are probably people out there saying what about quantitative easing and all the other things that I talk about but I’m actually…and some of those who are quite negative…but I’m actually quite an optimistic fellow about the human experiment.
HILTON TARRANT: You touched on education there as a key to unlocking this potential. How else do we harness that potential…do we create the opportunities like the WhatsApp founder Jan Koum. How do we develop those opportunities?
JOHN MAULDIN: I think we’re going to have to understand that the education, the learning, the skills that we need for the next 30 – 50 years are not those that we had in the past. We’re going to have to realise that in the not too distant future…I’ve got an iPhone that I would show everybody but this is radio but they know what an iPhone looks like…it’s a thousand times more powerful than the phone I had 15 years ago and a fraction of the price. In 15 years it will be a thousand times more powerful and again 15 years after that it will be another thousand times more powerful… that’s just the potential of Moore’s Law. But in 30 years what that means is a thousand…I say a thousand, but it’s a million times more powerful. I’m going to be wearing a button that has the ability of 20, 30 human brains total capacity and the ability to learn and I’ll be able to task them. I want to do this, why don’t I do this and I’ll go to sleep at night and I’ll wake up and here’s my business plan, here’s how we go create this new process. I’ll be limited by my imagination. I’m sorry but is our education system that we’re doing today creating a world in which we understand how that even works…I don’t think so. We need to teach our children the tools that they’re coming along with. The things that we’re creating are going to be so much more powerful and they need to learn how to manipulate that, how to do that…they need the basics. They’ve got to understand how the world is changing and working and they’ve got to understand true reading, writing and arithmetic. You’ve got to understand the science but you’ve got to understand how all these things connect and you’ve got to understand how to use the tools to connect them and that’s different than some of the things we learned when I was going to school.
HILTON TARRANT: And different to some of the things that I learned when I was going to school…
JOHN MAULDIN: If all we’re teaching people today because what we have is a system that has worked extraordinarily well for the first and second industrial revolutions. We’re getting ready to go into the age of transformation and that means that we have to allow…because of the rapidly accelerating change…we have to train our children to adapt continually. Education is a process that will never end. Giving people a degree…you graduated, you’ve learned… it’s kind of a misnomer because you don’t finish anymore. I don’t feel like I’m finishing, I’m constantly learning, I’m constantly growing, I’m reading everything and it is a daunting task but that’s what humans do and we need to help people learn to find their spot. Not everybody will be a technology genius, we need artists, we need everything, but we need to learn to help people to figure out what they can do to make themselves happy, to find meaning in their lives and then it comes back to economics and the most important thing for politicians, I think. Not just in South Africa but the world over, everywhere I go they’re asking how do we create jobs. Now with technology changing manufacturing is going to become less important…how do we create jobs, what do we do…do you want to be… and he says no we can’t bring in the water powered machines that will weave because we’re going to put weavers out of work…you’re fighting the tide. No that’s not what you do, you figure out what to do to retrain your workers so that you can take advantage of the new tools. Now does that mean what you were doing for the last 10 years is going to change, absolutely. And the worst thing that we can do is try to get politicians to protect us from change. What we need to be doing is helping people to adapt to change, because the more we adapt the more we allow it to come into our world and figure out how to become the master of change rather than the victim of change the better off the entire country will be. Not just South Africa, but Tanzania, Uruguay, Thailand and the United States.
HILTON TARRANT: Final question…let’s turn this around from the perspective of investment and investing. In the age of transformation and this age of disruption where things are changing far more rapidly than they’ve ever changed before, we can’t be doing the things that Warren Buffett did 50 years ago, surely, when it comes to investing?
JOHN MAULDIN: Actually Warren had a pretty good idea. He bought value and even in the age of transformation there are certain values that are going to change. We will never run out of the need for people to be honest, for people to be fair and just, so there are certain values and one of those values is value investing. Find a company that sells a product that will correctly and aptly give you a dividend, give you a return and can grow their business…that’s value. Now we also have brand new companies that are going to create new things out of old cloth, a new cure for cancer, a cure for cirrhosis of the liver…these are things…I’m looking at a company that honest to God I think outside 10 years, maybe five they’re going to have full on bullets for most viruses. You start feeling like a virus is coming down, you go down to your local pharmacy and buy a patch and slap it on your arm, and 24-hour later the virus is gone. That’s pretty cool, that’s going to be a great company to own if they can actually pull it off and here’s the interesting thing…I don’t know if that company will do it but somebody will because when they lay out the technology, and you see what they’re doing, it’s just bits and bytes and its dealing with proteins and all sorts of genetic material, but at the end of the day it’s just bits and bytes…it’s all information.
So what we have to do as investors is find out where we’re creating value, where we’re creating opportunity and at the same time, we do need to recognise that governments unfortunately are still mired in the past and they’re creating models to try to fix things based on something that happened 30 or 40 years ago. We’re using economic theories that are outdated and quite frankly unsuited to the world that we have today. But that’s what they’re going to do anyway because that’s what the academics are telling them to do. The guys who aren’t out there actually having to make a payroll, they’re just mired in their own thought processes of their own theories and so they’re going to give this quantitative easing, they’re going to print money, they’re going to try to figure out how to leverage things, they don’t want to deal with the reality of balancing a budget and so we have to worry about what’s the value of my currency versus your currency. Is this a country, a place that is going to allow me to be productive, or are they going to try to tax my profits away… It would be great if all we had to do was just look at business opportunities, investment opportunities and we could do that without having to worry about what are the voters in France going to do. What happens to your God if they decide that Jean-Marie Le Pen should be the president of France who then decides to take them out of the euro which blows the euro up because the euro doesn’t exist without France? What happens then and yes, if you have an international portfolio, you actually have to worry about what the polls are running in France because if Jean-Marie Le Pen is the answer then France is asking the wrong question. So yes, the earlier part of our conversation was about all the sweetness and light and excitement, the positive view of the future and the reality is that we live in a world where government is the fly in the ointment and so we have to balance it. We have to look at where we’re going and hope the technology and the age of transformation can go faster than the destructiveness of governments…
HILTON TARRANT: John it’s been an absolute pleasure.