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Ruchir Sharma | The art of travel

Ruchir Sharma | The art of travel
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First Published: Thu, Jul 05 2012. 09 20 PM IST

Write balance: Sharma has been interested in writing since his college days. Illustration by Jayachandran/Mint
Write balance: Sharma has been interested in writing since his college days. Illustration by Jayachandran/Mint
Updated: Thu, Jul 05 2012. 09 20 PM IST
Fund managers, as a species, are usually ebullient and project a picture of optimism, however dire the macroeconomic circumstances. Ruchir Sharma, Morgan Stanley Investment Management’s managing director and head of emerging markets, however, doesn’t believe in this approach.
“I have been a writer as long as I have been an investor. My entire point is that…I have always spoken my mind. I’ve always found that it is better to say what is the truth rather than positioning yourself in terms of a marketing strategy,” he says.
New York-based Sharma is promoting his book Breakout Nations: In Pursuit of the Next Economic Miracles when we meet at the San-Qi restaurant at the Four Seasons Hotel in Mumbai. He is in a pink shirt with a tie and says he finds it surprising that Indians wear heavy woollen business suits in the Mumbai summer. He is shy and not forthcoming when talking about himself, but gets animated about his ideas, the markets and his book.
Write balance: Sharma has been interested in writing since his college days. Illustration by Jayachandran/Mint
In fact, just like the Big Mac Index which The Economist uses to compare the purchasing power parity of nations, Sharma has devised a Four Seasons Index. He uses that metric, along with other esoteric things such as the price of a Bellini, to measure how expensive each emerging market is. According to Sharma, a country’s ranking on the index says a lot about its competitiveness in world markets, and the higher it is, the more its future growth is at risk. India ranks somewhere in the middle, while Brazil and Russia are the most expensive.
The book, which has had its share of bouquets and brickbats, particularly from the wonks and pundits of nations Sharma projects as “losers”, mirrors Sharma’s approach to managing his $25 billion (around Rs 1.38 trillion) fund.
“There are many approaches to what I do, mine is more of a ground report,” says 38-year-old Sharma. “I like to spend time in emerging markets talking to different people, even when I am in India. I don’t like being in the office too much. You never know when you’ll get new insights.”
In fact, as he writes in the book, it was a chance meeting with the son of a multimillionaire at a Delhi pub—whose casual “where else will the money go?” response when he learnt that Sharma was a fund manager—that helped him form his idea for a book. The basic premise of his book is that the extended economic boom we saw between 2003 and 2007 was part of a synchronized global boom, one that isn’t likely to be repeated any time soon. Each emerging market now faces different problems and there is no rising tide of liquidity that will boost all markets.
“I wanted to write an economic travelogue but I needed a big idea. Those couple of meetings (the Delhi pub and a presentation to Russian President Vladimir Putin and his cabinet, where they displayed a sense of complacency) helped me crystallize what the big idea was going to be,” says Sharma.
While it is not unknown for fund managers to be writers, what makes Breakout Nations different is Sharma’s width of reportage, from visiting Bihar during the elections to partying at Istanbul’s nightclubs by the Bosphorus. The interest in individual emerging markets, as opposed to viewing them as one single entity, finds its way into Sharma’s other interests as well. He says he watches two foreign films a week as he finds it’s “like learning something. I love to understand the social fabric of a country, I like seeing different sets of different parts of the world.” Recently, he watched The Intouchables, a French film. He counts the German movie The Lives of Others among his favourites.
He says he carries a notebook, a habit for the last 16 years, when he travels—at least 10 days a month. He tries to visit a couple of so-called frontier markets (economies which are underdeveloped even relative to emerging markets, but have potential) through the year and often writes in aeroplanes “when his thoughts are fresh”.
Sharma has been a writer since his college days. While doing BCom honours from the well-regarded Shri Ram College of Commerce in Delhi in 1991, he started writing on global markets for the daily Business And Political Observer and later The Economic Times, where he is still a regular columnist. Back then the Indian economy had just started liberalizing and the opening up of the local capital markets was still a couple of years away.
“I have had a fascination for global economics from my school days, so the idea was how it could translate into something of practical use,” he says. “To be writing is a natural extension of my job. I am obsessed with this game—what is going to happen in the global economy. When you write about it, you end up researching and crystallizing your thoughts so much better.”
Write balance: Sharma has been interested in writing since his college days. Illustration by Jayachandran/Mint
After college, Sharma continued writing the column though he secured a day job as an economist for investment banking and corporate advisory business Prime Securities Ltd, and it helped him hit the jackpot.
“I was keen to do a PhD abroad,” recalls Sharma. “Then some people from Morgan Stanley liked what I used to write. They were quite fascinated by the fact that someone sitting in India was writing about all this and hired me.”
Sharma dropped the idea of a PhD, joined the firm in Mumbai as an analyst in 1996 and was quickly covering Asia for them. It was a “baptism by fire”, because soon after he joined, the region was in the grip of the 1997-98 currency devaluation crisis.
“At that early stage in your career, that was quite something. Also, the fact that so many people and firms I knew in Asia were wiped out and the whole asset class was questioned.” People started asking whether it made any sense to invest in emerging makers at all. It was an existential crisis, he recollects.
“It just toughens you up when you start that early and go through hell like that. Somehow, when the 2008 crisis happened, it didn’t bother me as much,” he adds.
The biggest learning from the Asian crisis, according to Sharma, was that trends are ephemeral in nature.
“They last for a while and pass, whereas the biggest mistake we all tend to make is that we extrapolate from the past,” Sharma says, a point which he reinforces repeatedly in his book.
By 2003, Sharma had moved to New York, and became the co-head of Morgan Stanley’s emerging market fund by the end of that year. Russia was one of their early emerging market picks, he reminisces.
But now that his sentiment on Russia has “completely turned around” as the political leadership loses its way, where will the money go? “Philippines is one country we discovered in the last two-three years. You want to invest in markets which are beginning to feel the pain and want to do something to turn things around,” he says.
Sharma is not too optimistic about India, giving it a 50-50 chance of being a breakout nation, or one “which will beat expectations and grow faster”.
“Whether that is a controversial view and something which is being gradually dubbed as too pessimistic, I don’t know,” he adds. “Today, the more time I spend in Delhi and Mumbai, the more bearish I get. The more time I spend travelling in other states, the more bullish I get.
“What I find fascinating when I travel during elections is that India’s growth model should be evaluated state by state,” says Sharma.
ravi.k@livemint.com
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First Published: Thu, Jul 05 2012. 09 20 PM IST