Defensive Investing for an AI Bubble | Ruchir Sharma's Hedge Rules
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Bankless Nation, I'm very excited to introduce you to Roshir Sharma. He's the CIO of Breakout Capital. He's the bestselling author of a number of books, Breakout Nations, The Rise and Fall of Nations, What Went Wrong with Capitalism. Roshir, welcome to Bankless.
Thanks, Ryan. Looking forward to doing this.
Okay. So I feel like it's an absolute pleasure to, pick your brain today. You're an investor I followed for a while, I admire. Actually, because of you, I listened to an episode with you not too long ago, and I dabbled in my first emerging markets assets. So I made some buys in the emerging markets landscape. I had not previously done that. I think you've got a lot of ideas that can help break us out of our bubbles. So maybe I'll start with this question, Rachir. What are your most contrarian ideas as an investor right now?
Well, you know, having studied market cycles for the last few decades, the one thing we know is that cycles don't last forever, that there is a certain duration to them. And what I've typically found is that every decade is defined by some new investment theme. So if you look back at the last decade, it was all about American exceptionalism, which is that the only place in the world it seemed like to invest and to make money was America. The decade before that, it was all about emerging markets, the BRICS as they came to be known, Brazil, Russia, India, China. The decade before that was, again
So do you see an analog in terms of a decade that the twenty twenties is like, or is there something new in your mind? So if it's not so much American equities, then what replaces it? Is this some sort of emerging market type of activity like, you know, the bricks in the February? Mean, some would say, given the the recent AI moves, particularly in the last two years, this looks something like the nineteen nineties again, which might actually favor America in this case. But what's the theme for the twenty twenties?
Yeah. So as I said then, you know, like, for for the 2020 so far, American exceptionalism has already done relatively well. But I think that it's about, you know, some of these international markets doing well, including China making a comeback. You know, like, for many years, I was very bearish on China because I just thought that the debt and demographic problem that China had was intractable and something that they would not be able to fight. But I think that the advances that China has made on the AI front itself are very impressive. And there is a legitimate case to be made that China's c
Let's dig into all of this for the rest of the episode this year because you've opened up a number of interesting paths I think we can go down. The the first is maybe talking about America and AI. You wrote this post in the Financial Times recently that I enjoyed. This is basically entitled America is now one big bet on AI. I think a lot of investors sort of feel this. I'm wondering if you can give that more quantification and talk about that. So America has one big bet on AI. What are you seeing that justifies this analysis?
Well, one is, you know, just a pure economic impact, which is that if you look at the amount of spend that American companies are doing on AI and you calculate how much is that contributing to GDP, the number works out to close to 40%. Right? So 40% of economic growth in America this year is coming because of all the spend that's happening on AI. But that's just the so called first order effect. There are, I think, two or three other secondary effects because of what's happening on AI. Around 80% of the Ameri
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