September 28, 2010
I gave a speech last night in Kiev to a large audience of bright, young minds who are about to start their professional lives and wanted to find out more about global opportunities.
The topic of my remarks was how to survive and thrive in the Age of Turmoil, why there are tremendous opportunities around the world, and how to capitalize on them.
In order to set the stage properly, though, I discussed why sovereign risk is the greatest risk we all face. In the coming years, I believe that governments will reduce individual freedoms, increase taxes, seize retirement accounts, take over private enterprise, provoke wars, engage in protectionism, etc.
These things are already happening. Politicians and bureaucrats continue to wreck their respective economies by using that tired old playbook of 1) Inflate the currency; 2) Indebt and spend. These plays never work… and as unrest grows and patience thins, politicians will step up their efforts to take control.
The majority of my audience grew up in the post-Soviet era… but they understand this danger quite well. Ukraine is corrupt, volatile, and highly bureaucratic, and they know that their government is a major obstacle to prosperity.
Registering a Ukrainian company, for example, is a mind-numbing process that can take months. There is a laundry list of government workers who must affix a particular stamp or seal to this form or that application, and all along the way there are people telling you why your paperwork isn’t filled out correctly.
These institutions add no value whatsoever… in fact, they destroy value by stifling entrepreneurship and productivity. Consequently, several would-be Ukrainian businesses will never get off the ground simply because the government makes it too complicated.
As a result, legions of Ukrainian workers are sitting in a government office engaging in useless tasks like putting stamps on forms, rather than out there in the private sector creating value for consumers.
Meanwhile, if I want to structure a business in Panama, I simply need to call my lawyer and it’s done. In Hong Kong and Singapore, I don’t even need a lawyer, I simply pay a small fee to my corporate secretary.
I believe wholeheartedly that no country is perfect… and conversely, no country is a complete basket case; every jurisdiction has at least something to offer– even Ukraine.
The idea behind planting multiple flags is to take the best that each country has to offer (i.e. tax residency, business structures, a growing consumer market, beautiful weather and scenery, cheap medical care, solid banking, etc.) and diversify your assets and interests away from a single location.
This is one of the key ideas I left behind for the students, and many approached me after the lecture to talk about establishing a company overseas in order to run a local business.
The other key idea I left them with was about opportunity. I know there is a lot of doom and gloom in the world, and I explained my thoughts about the Age of Turmoil.
I’m convinced that the old system of debt and consumption has run its course. What’s emerging now is an entirely new game, and the rules haven’t been written; people who embrace this unknown, define their own realities, and seek new opportunities will be richly rewarded for their courage and creativity.
The nice thing about it all is that, as governments continue to make things worse, they create more problems. More problems require more solutions, and solutions require entrepreneurs and new businesses that can create value.
Fundamentally, a good entrepreneur is simply someone who can identify a problem in the market, and provide a good solution that customers are willing to pay for. The greater the problem, or the more people it affects, the greater the value created… and the greater the reward.
There will be great problems created in the Age of Turmoil, and even greater opportunities presented for creative people to make new fortunes.