I've been looking forward to this interview
for a very long time. I know many of you have asked for
this as well. Today, I've flown up to the Bahamas to interview
Kiril Sokoloff, the founder of 13D Research. Kiril is
kind of revered amongst investment research writers as the premier service in the world
today. He's been doing
this for a long time. And his clients are the most famous people
in the world, the most famous industries, governments, hedge fund guys-- everybody,
you name it-- listens to what Kiril has to say. Kiril's real skill set is peering into the
future. He's less about the trade today, but more
about where is the world going, and how can we take advantage of the
big trends that are happening. And I, personally, love a good big
trend theory as well and a good discussion around it. So I'm going to dig in with him about technology,
I want to talk about China, I want to talk about
India, I want to talk about the future of the US, demographics, health,
all, a number of long-term issues, and see where we get to, see what Kiril's framework
is, and see how we can take advantage of that. So settle in. I think this is going to be a fantastic discussion. Kiril, great to finally sit down and chat
with you. You're one of the most requested interviews
we ever had. We have a lot of friends in common. I just think it's
going to be a fabulous opportunity to talk through some of the great things that are
going on and just pick your brains. I think I'd love to start from the beginning. And I think one of the key things to talk
about is the deafness and how you've dealt with that in your life,
which I think is something that defines you, as a person. I'd love to
hear about that. Well, it's wonderful to be here. Thank you for inviting me. It's great pleasure to have this
conversation. Helen Keller was both deaf and blind. And she said, when you're deaf, when you're
cut off from people. When you're blind, you're cut off from things. So if you ask the average person, whether
it's better to be blind or deaf, it's oh, yeah, much better
to be deaf, but since they're neither, they don't know. So in my case, in
the mid-teens, I started to lose my hearing. It king of just went down and down and down
until I went totally deaf. So there were a lot of lessons from that. The first is that everything is impermanent. That's a Buddhist, deep Buddhist philosophy. My hearing, I couldn't
hold onto it. It just went, right? And then the interconnectedness of all things. So before there was the internet
and cell phones, I would literally have to stop people in the streets of New York and
say can you help me make a phone call to call home? I'd be at an airport. I'd have to stop someone and say, you know,
I can't hear-- because in those days, they didn't have the posting of where the planes
were. But there's be someone to ask when I couldn't
hear. Can you
help me? So that's a very hard thing for an independent
person to have to do. But I realized I'm interconnected with everybody. Then, there was the lesson of never giving
up. And what deaf
people do, late deaf in adults is they give up. It's just too much strain. Because you're reading lips, and lipreading
is very imperfect. And your mind is like a computer. So you're going sh-sh-sh. And you just get so tired
trying to figure it out. At the end of whatever your day is, I'm done. And I resolved, I would never not go to a
meeting, I would never not go to a social event, no matter how difficult, no matter
how painful. And I would go to meetings, and some guy in
the back of the room with this hand like this would ask a 5-minute
question. You obviously can't say I'm sorry, sir, I
didn't hear you. So you just-- what are you going to do? Walk
out? So you got to answer the question as best
you can. So what you learn is that you can get through
anything. And it makes you tough, and it makes you strong,
and it makes you disciplined, and it makes you have a
philosophy of never ever, ever, ever, ever giving up. Yeah. It definitely gives a sense of bravery. because
you have to overcome obstacles. And the more you get
used to overcoming obstacles, the better you are with dealing with obstacles. This is exactly what I'm telling my stepson,
15-year-old stepson. He doesn't quite get it yet, but it's the
road to character. And David Brooks wrote this wonderful book,
and he profiles some people. And the major message
is that people don't really remember the good times. They remember how hard the bad times were,
and the fact they got through it. It's very interesting. So you then started 13D. When did you first start? In 1983. Why? Why did you start it, and what were you thinking,
and where did you think it was going to go? 13D represents the SEC filing. If you buy 5% of a public company, you file
a 13D. So I had been following
13D filings for a number of years. And I had a database on people that are now
household names, but weren't at that time-- Warren Buffett, Carl Icahn,
et cetera, et cetera. And it's a fabulous disclosure document because
you have to say your average purchase price, your investment intentions, how much money
you've invested, and your investment purpose. And if you want to take over the company,
and you say it's an investment, it's not going to work. So I send out a dummy issue to 200 of my friends
saying here's what I'm thinking of doing. And stocks are selling
way below breakup value because inflation went up, asset values went up, and equity
is cheap. And we got a
50% response. So all of a sudden, I was in business. It wasn't something I did for a part-time
investment. And
then we got written up by Forbes. And so, by November, I had 2,500 subscribers. And so it became a real
occupation. So now, cutting forward quite a few decades
after that. We're now here, in the Bahamas. You're kind of
living in paradise, but yet, you work incredibly hard. And you're a big accumulator of information. How do you
do that? How do you get the balance in life that you
need? Well, that's a great question. I think it's extremely important. And the balance is many things. So a balance
between work and fun, a balance between intensity and relaxation, a balance between thinking
and meditating, a balance between male energy and female energy,
a balance between spirituality and focusing on the world--
so I'm extremely disciplined about time. And I'm sure that I could be criticized for
being abrupt. But I'm on to my next thing, so it's a very
short conversation, very short conversation. And the emails are extremely short, and that's
the way it is. So I am
phenomenally good at time management. And I have a regime. The only way you can get everything in is
to have a structure. But if you're too disciplined about time--
because I've made similar choices as yourself. I lived on the
Mediterranean coast in Spain. And I now live in the Cayman Islands, but
much of a similar work-life balance. But I find if I'm too structured about time,
I lose the beauty of time itself. Well, that's actually right. Now, my answer to that is that I live twice. And it's a wonderful Japanese saying,
"You live twice-- once when you're born and once when you see death in the face." It's a James Bond film. It's
an Ian Fleming book. So I thought about that. I said, I'd like to live twice every day. So what I do, after I've done my meditation,
I'll get into bed, and I'll relive the day. Where did I have breakfast? What happened? Who did I see? What was the beautiful sunset that was so
transformative? And what you find
is there were things that you missed because you were rushing to the day that were incredibly
significant. So I
really live twice every single day. So let's go into the big things now. The biggest thing everybody's obsessed with--
cryptocurrency, Bitcoin, blockchain-- I'd love to pick your brains. What are your thoughts on this whole thing? I've got different views to
most people. But how do you see this line up? Well, there's no question that the underlying
technology, blockchain, is transformative. So I've been investing
in blockchain for a long time. Bitcoin is something else. And one way of looking at Bitcoin is that,
it's decentralization. And it's taking away the power of money from
central banks and governments, which is why I
think there's this passion about it and excitement, that people want to be free and liberalized
and decentralized. Governments are terrified, of course. Governments will try to squash it and pop
the bubble, which they've been doing in gold for a long time. They've
been suppressing the price of gold. But one of the things that's most interesting
is that they don't own Bitcoin, but they do own gold. And the Russians and the Chinese and other
central banks keep buying physical gold. And
there's an interest, in many countries, to get off of the dollar standard and maybe redo
the financial system with a gold-backed currency. So how this all plays out, no one has the
faintest idea. But I see it as a strike for monetary freedom. And I think
all of us would like to get away from the power of central banks. But is this-- for me, it's a bit of a fantasy. Blockchain is a whole different thing. The future of the architecture
of the financial system, I think, that's clear. But I tend to spend a little time talking
to people about Bitcoin. And
there's a belief that this is the answer. But then, it's almost impossible to be the
answer. Today, alone, and overnight, it was up and
down 20%. For a while, we priced Real Vision in bitcoins. And at
the time, it was 0.8 bitcoins, which was about $400. If I’d used the same 0.8 bitcoins now, it
would be worth $12,000. It’s unusable in some of the formats that
people want it to be usable in. I think the idea is interesting,
and that, clearly, there’s a desire to get away from central banks and have some decentralization. But I don’t
think this is the answer. It's all up for grabs. And there's a message that the markets are
giving us on this. And how it plays out, and
which way it goes is to be determined. But something big is happening. And it's very possible that Bitcoin could
be the beginning of the questioning of paper money. And that would be a very good thing because
central banks with quantitative easing and what they've been doing in manipulating markets
so the markets are really free, if we can get away from that, that's a very good
thing. The transition from where we are now to there
is tumultuous. Something we were talking about earlier, on
this whole topic, is the massive control that a few tech firms
have over our lives and the digital age, in general, where is your thinking with this? Well, the first point is that the concentration
of power will continue until it's met by an equal and opposite
amount of power. And if you study history, you'll see this
happens time and time again. So let's look at the Nazis. They had Britain on its knees, they had conquered
Europe, they were in North Africa, they had invaded Russia,
there were 30 miles from Moscow, and then it looked like it was over. They won. But they hadn't won, and the
pushback began. So you see that. It's the law of physics. It's the law of the universe. This isn't something that
algos can get around. It's the law of the universe. And the accumulation of too much power inevitably
brings a backlash. So where it will happen is-- in 1996, Congress
passed a law exempting the platforms from liability for what they
put in the platform. Obviously, they're powerful, and rich, they
don't need that exemption anymore. So then,
they will be liable for things that they put on their platform that is ugly or damaging
or wrong. And that means
a big shift. So that's one thing. A second thing is that they are stymying innovation. And they're doing this by
acquiring other companies and by the sheer power and market strength that they have that
they can get into the new fields to a degree that no one else can. So if you look at the jobs in artificial intelligence
that are offered in the United States, certainly, 90% of them at
least are being offered by the tech behemoths. So that means they're just getting more advanced
and more advanced and more advanced, and then it will
be quantum computers and quantum communications, and how
you're going to catch up. The problem is that the US Congress is asleep
at the wheel. They are technologically ignorant. So they don't understand what's going on. As we were saying earlier, the EU
gets it, and the right to be left behind, and you can't transfer data from Europeans
back to the United States. So
there already is movement there. And that's probably where it will begin. Although, 50 countries, in one way or
another, are pushing back. And China already has pushed real back. So this is coming. It's just a question of
when. And what does it mean for those companies? And what does it mean for Google? I mean, Google are
essentially the internet, as we know it. And Amazon is storage of the internet as we
know it, and a number of other-- how does this play out? Where do you think the probabilities lie? Well, I think that it's very hard to know
how the regulators will go. But we're using, in America, antitrust
theory that was from the late 19th century, early 20th century, which is monopoly power,
when it raises prices is bad, but monopoly power that is lowering prices
and increasing efficiency is good. Well, that needs to be
updated. You have to look at monopoly power, however
it's used. And it's the data that we all create through
our transactions, through our texts, through our purchases that is the most valuable commodity
in the world. And whoever controls that data, controls the
power of the world. And they have it. And we're surrendering it to
them for free. And that's, even Estonia, that isn't the way
it works. In Estonia, the people who generate it, own
it, and if you want to sell it, you can sell it. So that's another area where we could see
change. Regulation of the
tech platforms like media companies-- But then, again, we now have quantum computing. Next year, or in 2019, the Chinese will have
a quantum computer that is a million times faster than all the
computing power in the world today. And they have created a quantum communication
system from Beijing to Shanghai that is unhackable. And it is a new form of internet. And whoever owns quantum communications and
computing will literally own the world. And the Russians are working on this as well,
aren't they? The Russians are working on it as well. And the United States surely is, but not as
concentrated as China is. So all I'm saying is that there can be technological
obsolescence as well. Because if you-- one of the big problems
with the internet is that anything and everything can be and is hacked. There's absolutely no privacy. And data
is available for anybody who wants it. We've been writing about this for 17 years,
urging people to buy the internet security stocks, knowing full-well
that they admit they can't stop it, they can only mitigate it once it's
happened. So the idea that you create a new unhackable
internet is also one possibility. But quantum computing does another thing,
which is almost destroy Bitcoin because cryptography is almost
worthless at that point. That's right. That's right. And it would destroy the way many things are
done. So it's the ultimate disruption. Yeah. Let's go back to financial markets. If you apply quantum computing in financial
markets, what chance do any of us have? Well, that's exactly right. And if you go back 4 years ago, machines were
already able to do every task better than humans. Already, 3 or 4 years ago, the best computer
programs in the world are not as good as machines. And let's go to artificial intuition, which
is fascinating. So here we have this AlphaGo, which is created
by Deep Think, which Google bought-- and it's probably the most advanced AI firm in the
world. So it was clear
that Big Blue could beat the best chess master. Because chess is a memory game. So he analyzed millions of games, and that
was easy. But the game Go, which
is an Eastern game, that has been existence for 2,000 years, is intuition. And there is no programmable history. So when AlphaGo beat the best Go player, which
is, I think, about a year ago. that was a huge revolution. Oh,
my god. And then AlphaGo Zero comes along. AlphaGo Zero, in 30 days, teaches itself with
no help, to beat AlphaGo 50 games to 0. So knowing that this is out there-- and if
you look at Moore's law, machine learning is increasing a multiple-- I
can't even tell you how much faster. But it's just exponential. So does this get us to the singularity that
a lot of the West Coast is worrying about where machines take over
the world? I don't know the answer. We think a lot about it. It's extremely important. Everywhere I go, people are
concerned about it. Will I lose my job? Will I still have a job? And the answer is unknowable. I do think this is another reason why the
whole tech tsunami has to slow down. It's too fast. People can't absorb it. It's
overwhelming them. It's too much change. You just look around-- you see breakdowns,
and opioid crisis, and mass shootings-- it's not directly related to
that, but there is nothing to hold onto anymore. So I think that the answer is that we have
to be human and emphasize human qualities, which is exactly
what you and I are doing. We are talking on important topics. We're connecting. And all we're going to have left is connecting
with each other. And that will be the way
forward. I mean, that's Utopian. It's the thing many of us would dream of,
but meanwhile, as you suggest, there's a holding out of society that's causing things
like the opioid epidemic. What are your thoughts about how-- how
does society get to the Utopian society and away from the mess we seem to have left at
the moment. And it's
prevalent all around the world, well certainly, the Western world. Well, we've been writing about artificial
intelligence destroying, potentially, billions of jobs for 6 or 7 years. And people like Stephen Hawking are very against
it. Everywhere I go, I ask this question. Everywhere I look, I
ask our people-- we have 65 people around the world. Study this. Tell me. Find some example of where
technology is creating more jobs than it's destroying. And nobody can find anything. And the jobs that are being
created in the United States are low-paying, temporary jobs. I don't know what the answer is. I fear for the future because these people
vote. And what the tech company essentially doesn't
understand is that, with their idea of universal basic income
as a solution, people have to have meaningful work to have a purpose
in life. If you have no purpose in life, you can't
just go out and play golf. When you're 75 or 80, sure, you can
go out and play golf. But you have to have a job, a career, a profession
that is meaningful to you. And if that's
taken away from you, that's not nirvana. So I'm tremendously upset about it. And actually, America should just stop and
say we have to do something for these people. If we don't, there's going to be a social
vote. Because they vote, and they will vote against
technology, and they will vote against free markets. And the millennials already, 90% of them are
socialists. So
where do you see that trend going? You'd better start to do something about it. And also, to exacerbate it, you have the baby
boomers hurtling to retirement. Exactly. And they don't have enough money to retire. It's a huge disgruntlement to come from these
people. Exactly. Exactly. And can we trust that the pension payments
and social security will be there, and in real
terms? No. The unfunded liabilities of social security,
Medicare, and Medicaid is $100 trillion US. That's 5 times
GDP. It's the same in all the developed countries. And what we call the worker to retired, the
dependency ratio is terribly distressing, fewer young people
supporting more older people. And society can't indefinitely absorb that
as the baby boomers and others age. So that's why I studied Japan,
which I call the laboratory. And that was the first country that had the
baby bust, the first country that had the population peak, the first country that had
working-age population peaked. And now, they've got severe labor
shortages, even though they're the most advanced country in robotics. Now, the Japanese companies are doing everything
to retain and find people except give wage increases. Because it's ingrained in their mindset for
20 years-- no wage increases. Abe gave them a huge depreciation in
the currency, and he asked them, please give wage increases. Now, he's asking again-- you must give wage
increases. So we'll see. It's a laboratory. And if the tax cut in America goes through,
will American corporations with that largess, will they give wage increases,
or will they use it to buy back stocks? What do you think? I think we all know the answer to that. So how does Europe work in all of this? We haven't talked about Europe at all. How does Europe play out? I mean, it's got a whole lot of structural
issues. The recent changes going on-- with Britain
is one thing, and potentially, in France, and Germany as well
as other things. How do you see Europe playing out right now? Well, let me go back a couple of years when
I was making the case that people were too bearish on China,
too bearish on Europe, and too bullish on the United States. And I was saying it's going to be a rerating,
just a rerate. And the arguments against the euro surviving
are extremely good. I mean, brilliant, I can't disagree with. But there are two factors that are more important. And the first one is 500 years of wars in
Europe and, most importantly, the two world wars that devastated
Europe. In 1914, Europe controlled 87% of the landmass
of the world. And it basically entered on suicide. In the first
World War, 500,000 French soldiers were blown up so that their bodies could not be recovered,
which meant that the widows could not get a pension. You think that, in 100 years, that scar has
gone away? I don't think so. So my view has been that Europe's desire to
hold together is much stronger than people think. And Brexit
confirmed that. Because the day after Brexit, European equities
started to improve relative, strength-wise, against
the S&P. People saw Brexit as the last, not the beginning. And you look at the agonies that May is going
through-- who knows what's going to happen there? I mean, she
can be fired. It's so complex no one can even begin to understand
it. And the EU is-- what incentive do they have
to do a deal? None. None. The longer they lapse, the more people leave
the UK to go to Frankfurt and Paris. So here I am watching Le
Pen-Macron first debate. This is before the second runoff. And I knew he had it then. He said to her, I know your
kind of nationalism. I live in a province that's full of graves
from your nationalism. I knew he had it then. And it's
amazing that Europe can hold together with 27 countries with different-- it's extraordinary. But this is huge legacy
of wars, and occupation, and destruction, and bombing, and killing, and dying. 100 million people died in the
second World War. It's a legacy that cannot be forgotten. The second point, which is probably more easy
to understand-- now, the United States is now deciding to do
bilateral trade agreements, not multilateral, and renegotiating all of the agreements--
Mexico, Canada-- you know it's coming with Canada, you know it's
coming with Japan, you know it's coming with Germany. So if you
are lonely UK, and the United States wants to beat you up-- which they did on the Northern
Ireland Bombardier plant-- and went from being a sweet relationship
between the UK and the US with a special trade deal to a trade
war overnight. And the prime minister of Ireland said Prime
Minister, May, you should maybe think that you're better off being
part of the UK. And I think the same thing applies in Southeast
Asia. So the prime minister of Thailand, around
about the same time, was with Trump in the White House. And I read the press conference very carefully. There
wasn't much said. But Trump said, we want to sell more to you. There's a trade deficit of $10 billion. Now, I'm the prime minister
of Thailand, I'm thinking-- mm, he's beating up Mexico and Canada. I'm a small country. I have no power. He
can do exactly what he wants with me. Maybe I'd better move closer to China. So what you can infer from that is that being
part of a powerful trade bloc is much better than being an
independent country. So even in Poland and Hungary and places where
they're upset with the EU, there's no talk about leaving the common market, the common
currency. But you do notice there's another shift going
on that you've alluded to, which is a gravitational pull between
Russia, China, potentially Iran, Turkey-- there's a whole bunch of other people form
together some sort of trade alliance. How do you think that all plays out? I know you're very bullish on China. Do you think that the
gravitational force of China is going to build the whole region? I do. Remember at Davos, Xi said, I believe in free
trade. We want to buy from you, and we believe in
the environment. We're going to clean up China. Trump, on the other hand, said we're out of
TPP, we're going to renegotiate NAFTA, and we're going to withdraw
from the Paris Accord. So it's very stark, that contrast. And
China has the One Belt Road, which many people in the West are cynical about. I'm not at all cynical about it. I
think it's real. And I think it's one of the great geopolitical
visions ever. So the entire trade belt, all the way across
Central Asia, into Eastern Europe, and down into Africa-- that's all going to become significant
trading partners of China. And Xi said that his view of the way globalization
should work is that it's not one country dictating to another
country how to run itself internally. You do trade, and each country has its own
sovereignty. And I'm not saying it's good or bad. I'm just saying that the China model, which
is, we'll give you money, we'll invest in you, we'll build power plants, we'll
build roads, we'll build high-speed rail, we'll buy from you. And
we're not going to tell you how to run your country. It has to be very appealing. But you don't think there is an opportunity
for the Chinese to exert control because they have such economic
power, or do you think it's more benign power? Well, that's a very good question. I don't think power is ever benign. And we saw what happened in Korea,
when the Koreans allowed the THAAD missile system to be put in, which ostensibly was
put in to protect Korea from North Korea. But you could argue that that missile defense
system also allows surveillance of large parts of
China, which the Chinese obviously are extremely upset with. So the Chinese stopped all tourist visits
to Korea or a year. And it was quite stark. And they've done the same thing with Japan
at various times. So there's no
question they can use that lever to affect change. So that leads us on to China, itself. I know you are very bullish on the Chinese
economy, overall. But as
investors, it's not so easy to invest in. How do you see the investment opportunities
in China? And how do you
also see the economic opportunities within China, which seem more obvious? But the investment opportunities--
most people in the West are struggling. : I believe in China. I've seen them do unbelievable things. And there is a dynamism in countries. And there's
this great memoir by Robert Kuok K-U-O-K, who's the Malaysian sugar king. He owns the Shangri-La hotels,
various other businesses across Asia. He's now 94. And it's a fascinating book-- sold out in
2 days first printing. And he's saying that the greatest entrepreneurs
in the world come from South China. And all the ones who've
made the most money in Hong Kong all come from there. None of them none of them went to college. None of went to school. And they just have this phenomenal talent
for entrepreneurials. And they work hard, and they're smart. And so I can't say that about the entire Chinese
people. But there is a phenomenal energy there. And when you unleash 1.3 billion people who've
been suppressed economically for 1,000 years, whatever
it is, it's just, whoa, this incredible tsunami of excitement and
energy. And you go to Qianhai, there are 145,000 companies
that are registered to do business-- some of the
biggest companies in the world. Why? Why? Because they see the potential. They see the energy. And what you
have, in what's called the Big Bay, which used to be the Pearl River Delta, which comprises
Guangzhou, Shenzhen, Shoon, Qianhai, is you have the
logistical manufacturing capital of the world. And nobody can equal
it. Silicon Valley has innovation, but it doesn't
have logistics or manufacturing. So you take that, if you have innovation,
and you add to it logistics and shipping, you have a huge advantage. So also in Qianhai, the Chinese government
is building thousands and thousands of subsidized apartments. And
they're telling entrepreneurs from all over China, come and innovate. Start a business. Not come and get a job. Come and create. I get that, and I find it very encouraging. But we've seen the endless empty cities and
the misallocation of capital, both at the government level, and
the private level. I mean, that's a real issue in China. Sure, the next
20, 30 years-- the Chinese story is pretty clear, but how do you get through the next
5? Well, I remember being in Chengdu after the
emerging Asian crisis. And a third of the buildings were
unoccupied, half-finished. I remember in 1997, 25% of the world's cranes
were in Shanghai. I remember being
on the top of the Shanghai stock exchange. They took a picture of me facing Pudong. There's wasn't a single
building. Now, they have 4,000 buildings-- all filled. And what we have is the greatest explosion
in wealth creation and taking people out of poverty. And there's still another 400 million to do
it. So every time we see one of these
cities, sooner or later, somehow, these buildings get completed, and they get filled up. And I've seen it happen
all these years. So I just can't bet against it. What about the debt? Well, the debt, remember, is global. So we've got $221 trillion global debt at
the end of last year. Obviously,
it's up since then. That's 3 times global GDP. And how much of that debt added since 2007
was unproductive debt-- a lot of it. In China, at least, it went into high-speed
rail, it went into airports and cities, it went into opening
up China like America did under Dwight Eisenhower with the interstate highway system. It went into infrastructure$11
trillion China spent the last 10 years. While America wants to spend $1 trillion over
the next 10, if Trump can get the money. So if a country is investing in the future,
in the latest technologies, and is investing to drag people out of poverty
so they can become contributors to the economy and earn a living, and then spend and grow,
that's a very healthy thing. And of course, it's expensive. This requires the use of debt. The US, in the 19th century, did the
same thing. US borrowed massively from the UK to build
its rail systems and its infrastructure. And it turned out fine. So as long as you're growing at 5% or 6%,
as I believe China will, because the consumer economy and the services economy, it's representing
70% or 80% of China's economic growth. So it's moving
away from investments, moving away from exports into domestic consumption. And that's a wonderful thing
because that's just the beginning. And how do you see India playing out? Because India looks like it's finally doing
some good things. What's
your view on India right now? What Modi is doing is extraordinary. And my feeling was that, what is holding India
back is British law, the caste system, regulations. It's not one country, but it's 40 countries. How are you going to make that work? It's
never been governable or manageable. But this is where the internet comes in. And I always felt that Modi could come in--
and like Alexander at the Gordian knot, which he couldn't untie, that
nobody could untie, he took a sword. He went shwew, and that's
what I see Modi doing with all of these restrictions, all of the taboos that were not possible to
break. And with
the internet, it's all possible. And he created this national identity card
that nobody thought was possible. And
he has an 88% approval rating. And so it's starting to happen. We think it's very possible that India could
be the best-performing investment arena over
the next 10 years. It's very exciting. We have a big office in Delhi. So where else do you see great opportunities
in the world? And where do you see great risk in the world? Well, I think opportunities-- I'll come back
to Europe. So Europe was selling at a huge discount,
rightfully so because it was very widely perceived that
the euro was going to break up. And if I'm right, that's not going to
happen. It's going to get stronger. And now we have Macron, who is young. He's techno-savvy he's creative, he's
inclusive, he negotiates with the two largest unions and gets a deal done. And France can come alive. And I said
this after Reagan was elected. And I coined the expression, the reverse of
Gresham's law. So Gresham's law is that bad currency drives
out good. So if you have a gold coin, and you clip it,
obviously, the good gold coins are going to go out of
circulation. So that's what Gresham's law is. So I said it would be the
reverse of Gresham's law, that, good management, and good economic policies would drive out
bad. And that's exactly what happened over the
world. And that's what I think can happen here. What works in France can also
happen in Italy. It could also happen elsewhere. So I think Europe is a great place to invest. And I also think that, coming back to what
was saying before, in 1914, Europe was at the peak of its contribution
to the world civilization. And was the center of art, center of
music, center of writing, and literature, and creation of beauty. And there's not much of that in the world. And
it's my dream that European civilization will have a resurgence here. And all the things that we love about the
old European civilization could come back for a while. So Europe is certainly there. Japan-- I've been very lucky. I haven't lost money in Japan because I never
wanted to be there. It's not because
I was smart. It's because it's manipulated, and I'm just
not going to do it. So I shorted the yen in 1995, and heads
blow off. And I shorted the yen after Abe said he was
going to run and wanted to take over the Bank of Japan. And this is October of 2012. Then I bought the Japanese stock market. But I believe that a secular bull market began
in Japan at that time. And it was 1989-- 2012-- god, that's a long
time, right? And they are some of the best companies. And they are sitting on piles of cash. And they do have
phenomenal R&D, and they are global. And so I think Japan is going to keep on doing
well. So I think those are
interesting. I think the opportunities are outside the
United States over the next 10 years. Yeah. So how do you see the US playing out? Does it kind of play the catch up to Europe's
growth, i.e., the lower growth from an aging population that's
indebted? How do you see the US play out and also the
difficulty of investing there with highly-manipulated
markets and et cetera? Well, you know we have a lot of capital is
concentrated in the US. And capital concentration inevitably leads
to capital dispersion. The challenge is to find how much is too much,
and when is a crowded trade a really crowded trade, right? And that's beyond this conversation because
no one really knows. I'm sure somebody does
know, but I don't know them. And so I think that too much capital concentrated
in us from 2007 to the end of 2015. And it did so because of
the deflation and because the US was considered a safer place. And Europe was tightening its banking system,
and they were a large source of capital for emerging markets. But the growth, the growth is in Asia, and
the population is in Asia. So that's, logically, where you would invest. But we also have all these geopolitical shifts
going on that I described earlier to a certain extent. Now you have
Egypt, which is allowing Russian military bases. You have Abe who's going to Beijing. You have huge geopolitical
shifts. And whether it was going to happen anyway,
or whether this happened because of Trump-- I think this
would have happened anyway. He's just accelerated with his America First
policies. So countries are looking around for new alliances. And
before, America was the one you wanted to have an alliance with. America was the country you wanted to trade
with. And now, it's a different world. So that also means that capital will shift
as well. So therefore, isn't Russia one of the most
underpriced markets in the world? Very much so, which might be the oil. So meaning no disrespect to my good friend
Andy Hall, when he closed his fund, he was considered a God of
the oil-trading world. And he had been bullish, and then finally
gave up. And he said in his resignation letter, or
his letter to his clients, this may be the bottom. Well, it looks like
it was. It's funny how these things work out. So if oil goes up, then the Russian stock
market will go up. And then, this brings me to MBS and Saudi
Arabia. So I've used the world's tallest building
indicator. It's never not worked. I'm sure there's a first time. And it called the top in '73. It called the top in '28, '29 It called
the top in 1907. And the Saudis will complete the world's highest
building in 2018. Now, we have this young
prince. 32 years old, and his father, the King, instead
of going the traditional way of the heirs being horizontal
like this, just has gotten right down like this, and severed everything that had been
done for 50 years. You have
to have an institutional structure for the transfer of power. Otherwise, you would get into very deep trouble. So here, we have hauled many of the elite
in Saudi Arabia into the Ritz Carlton to negotiate. Word is that some
are being tortured. I don't have any knowledge one way or the
other. But they're going to be surrendering all
this money. Now, how has he spent his money? Well, when he went to Moscow, I read that
he had 1,000 staff people that went with him. He gave a birthday party for himself and spent
$100 million. He bought, an IMPULSE yacht a couple of years
ago for $400 million. And who do you think just bought the new da
Vinci painting for $450 million? Now, you
can argue that that was a great idea to put it in the Louvre to bring tourists to come
see it. But the timing of it was
very bad. You can't do that when you are extorting money
from people who are known in the Western world as
being good investors and are the front of Saudi Arabia. So I think that's a very shaky foundation. And there's
no geopolitical risk at all in the price of oil. And then, you add to that you have huge underinvestment
in oil the last three, or four, or five years. And you add to that the fact that finally
shale oil is getting some capital discipline - that money just wont be thrown at these
people. So you put that all together, and you get
a higher price of oil. I don’t have to have something going wrong
with Saudi Arabia for oil to go up. Do you not feel that we didn't get the bust
that we typically get in the commodity cycle? We almost had a
bust a couple of years ago, but it wasn't quite big enough to write off some of the
excesses and just rebalance properly before we start again, which is how
it usually plays out. Well, commodities have never gone down more
than three years in a row, in succession, in 500 years of
history, which they did. Then, they went down a 4th year. So it's like 5,000 year lows in interest rates. The
summer of 2015, I got my buy signal on commodities. The buy signal is not precise on timing. But it was that the
big commodity producers-- the iron ore and the metals and mining we're giving away properties
that they paid $10 billion for. That's always a sign. We saw it in New York City real estate and
in 1977 when the US trust gave away a triplex apartment for $1 because the
maintenance at $3,000 was too high. And so it comes back to global growth. It comes back to China is shuttering capacity. And where you've seen
the sharpest rise in industrial commodities have been areas where they've cut capacity. There's still a lot of
capacity that has to be cut. I mentioned shale. They were a lot of the problem in oil because
capital was just flowing in without any restriction or restraint. And they were making money. They lost money, but the capital
kept flowing in. So I think it's a good case commodities will
go up. So if you don't see a risk of any global slowdown
in your framework-- because this is already the second
longest business cycle in US history. And other countries are extremely long, Australia,
ludicrously long-- do you not see a risk of a slowdown coming at some
point within this? Because as you and I know, there's a secular
cycle, and there's the business cycle. And the business cycle can get in the way
of a secular cycle for a short period of time. The long term cycle usually emerges. But you not see any risk in the business cycle? So starting in early 2016, it was clear to
us, from market action, that the deflation trends, which have been
very significant and very severe were beginning to reverse. And when you see something starting off with
this-- it's 1 market, it's the 2nd, and it's a 3rd
and it's a 4th. And the broader the number of markets that
confirm the trend, the more confident you are that it's
real. I've seen this many, many times. So right now, we have long dormant markets
breaking up. We have a whole raft of indicators on reflation. We
have countries that are moving away from austerity-- we've see in the United States to a certain
extent-- certainly Europe, other countries. Understand, you've got to get on the fiscal
side. You've got to get economic growth
because otherwise you'd be thrown out of power. Then there's a huge potential for CapEx spending. Corporations are just like investors. They act in herds. So after the financial crisis, everybody was
squeeze, squeeze, squeeze, squeeze, squeeze, squeeze, squeeze. And I squeeze you-- squeeze, squeeze, squeeze,
all the way. And will that change? I don't know. That's why I'm
watching Japan very carefully as a laboratory. Sharing in the profits with the people and
the labor, which of course, is going to help the country, but more
importantly, there is an arms race in technology going on that, if other countries don't do
quantum communications, or artificial intelligence,
or whatever it may be, high-tech manufacturing-- you'll be left behind. And I think there's going to be a wake-up
call. Oh, boy. We better invest. We better catch up. Because we're
really falling behind. Is that difficult? Because the country's been leading the way. As centralized investors, it's coming from
government. The countries are falling behind decentralized
investors. The private sector is too busy buying their
own shares to make themselves rich than investing in the future. Is that a structural problem? For sure. For sure. It is a structural problem. And it may not happen. But I think if you study quantum
communications and computers, you can see the potential that the existing structure
can just be overwhelmed by it. And this isn't-- I'm not saying anything that
other people don't know. And it's that fear that motivates people. Oh, boy, we better get going on this. So I can't predict how America will react. You would think that there would
be more spending. And there's certainly a need for spending. Infrastructure has been neglected. We kept track for a while. It was hundreds of trillions of dollars that
can be spent globally-- clean water, smart grid--
let me just use endless that the amount that needs to be spent and can
be spent. But you just have to mobilize capital and
to focus on spending it. And we're starting to see some signs, in our
interpretation of the market, that this might be starting to happen. There's another area that you focus on that
I'm really interested in as well that people are not so focused on,
which is longevity of life and a number of-- what's going on with health, in general, and
the opportunities that arise from that. Love to hear your thoughts on this. Well, I will go anywhere and do anything,
literally, and if it works, I will do it, and I'll keep doing. And then,
if it works, I'll tell my friends, and tell my clients. And they value that information more, probably,
than anything else I have to say because I find some really
interesting things. For example, I have these energy glasses. They're
made in Germany by an entrepreneur. And you put them on like this, and you're
looking into a light. It's a white
light in the morning when you wake up, and it's a red light at night. So what the white light does is, it stimulates
your brain, your focus, and your memory. And since I've been doing
it, my memory has improved tremendously. I'm just telling you my experience-- not for
everybody. And then at
night, you take it, and it stimulates the pineal gland, which is right here. And, when stimulated, creates natural
melatonin, and melatonin helps you sleep. And I'm just out. And sleep is precious. Another very important aspect of health and
longevity is your nervous system. And it's not something that Western
medicine focuses on. So you have the sympathetic, which is to fight-flight
mode. And you have the
parasympathetic, which is the rest, heal, and restore. And the Russians invented a test in the '60s
called heart rate variability test. And the reason was they wanted to test their
athletes to see how quickly they could go from
the fight-flight race, arrest rates, to a recover, so their muscles would be restored
for the next race, and also emotional stability. And it's very rarely given in the US, although
it's catching on here a little bit. But it's a way to measure your
ability to go from fight-flight into parasympathetic. And ideally, you want to have a balance between
sympathetic and parasympathetic. So we had a conference in August at my home
in Sun Valley. And the Key note was Dr.
Sapolsky who is an expert on stress. And he started off by saying everybody in
this room will die from a stressrelated disease. And of course people in money management are
stressed out to put it mildly. And that's a whole key part of this
is to know how to get rid of stress and how to get into the sympathetic mode. Is that not similar to meditation? Meditation-- you could go to a mountain in
Tibet with a lama and achieve this level of lack of stress. It would
take you about 5 or 10 years. You've got young kids. They're looking to the future, you're looking
to the future, what advice do you give them on how to navigate the world ahead. We agonized over this question, and have from
the very beginning. And I have friends who will say, well,
I'm going to go visit colleges and going to Brown, and Harvard, whatever. And I'll say yeah, but what are you
educating your children for? And then, they'll come back and say well,
if it doesn't work at Harvard, they can go to-- no. I'm sorry. What are
you educating them for? What world are you educating them for? And even very sophisticated people who are
aware of all these trends aren't asking that question. I'm just amazed. Because the world that we were educated
for doesn't exist. And the world, when these girls are ready
for whatever it is, college-- if, in fact, you even want
to send them to college, if, in fact, you want to send them to school, which maybe homeschool
them, maybe. Who knows? The world is changing. We don't know what machines will be able to
do. We don't know what will be the tools
you need to get through life. So we come back to, all you can do is to teach
them communication skills, teach them emotional intelligence, teach them respect,
and values, self-discipline, resilience. For me, in a world of robots and artificial
intelligence, it seems that there's a huge premium to be paid for
creativity. Right. Absolutely. But I don't know what your thoughts are. No. You're absolutely right. And my wife wrote this article about this
book that says that very thing and that creativity tends to be severely damaged in
schools. And I read her article, and I said, we're
pulling Natasha out of school. We've experimented with home schooling before. Now, we're going to do it. Because the damage
that the peers do, and the damage that the school-- which is focusing on you got to learn
this. You got it all here. And she's immensely creative. She's unbelievably creative, but it's not
being developed. I mean, the simple case is most rock stars
end up leaving the school system. The people who end up being
rock stars-- because creativity is too restrictive within that kind of societal education. No. I think that's absolutely right. And so you start off with home schooling,
and then curiosity. So if you
read the da Vinci book by Walter Isaacson-- it's an absolutely magnificent book. It's so hopeful. Because here,
you had the man who created the two greatest paintings ever-- the Last Supper and Mona
Lisa-- who also was the greatest scientist, probably, until Einstein. And he saw himself as being a scientist and
an artist. So today, we think that science is not part
of beauty. It's not part of art. And it was so refreshing to see this. So
it's also exposing the child to beauty and to the wondrous parts of the world where there
are treasures that have lasted for thousands of years. Because they touched that chord-- and there
is an eternal chord, and that's what da Vinci felt. And he was trying to understand the world. Because he understood the world, then he would
understand science, but also he could paint a picture that would describe the world. So that's part of it. Another part is my dream always was to instill
in the girls a love of learning and curiosity. And that's what da
Vinci was. He was probably the most curious man in history. And Einstein is the second most curious. So it's
intellectually curiosity. And you're not going to have that in school. And so my dream has been-- and if I'm lucky
enough, I'll pull it off. You take all the spheres of human knowledge. Let's say, you start off with geography,
history, physics, math-- you name it. You can slice it any way you want. And you have somebody come and
lecture to them for a week. It's not a famous da, but it's somebody who
could inflame the passion to learn in the subject. So in my own case,
I come from a long line of doctors. And I needed massive tutoring in high school
to get through a course called physical chemistry. My father had a PhD in chemistry. So that's what I would love to do for these
girls. And once you get them passionately curious,
and you open their mind to how these subjects are infinitely
interesting, then you just turn them loose on the world. Well, Kiril, thank you for opening your mind
for us and all the people at Real Vision as well. I think people
thoroughly enjoyed the wide-ranging topics, and the number of things that you know so
much about, and sharing with us was amazing. Thank you very much. I really appreciate the opportunity. Well, that really didn't disappoint. We covered an enormous array of topics. And that's one of Kiril's key
skill sets is his massive breadth of knowledge about so many things. And I think it was really interesting to see
his views on China, where he seems completely unconcerned by some of the more, let's say,
cyclical issues that may be facing China, because his view is firmly
on the horizon, where it's going. It's also interesting to see his views on
America and how it's falling behind in many of these things. I think the
discussion about technology and the future of tech firms was something also interesting. And I like the wholeness
of how Kiril approaches things, whether it's his lifestyle, and how he thinks of time allocation,
or how he thinks of health and longevity of living. I think all of these things are important. It's not only just about the actionable idea
for today, where can I make money, but how that all fits in with how we
exist within the world. And for that, Kiril is the master. I hope you
enjoyed it as much as I did.
