By Eric Peters, CIO of One River Asset Management
Pyramids: “For every Chinese born after 1990, six people support them,” said the CEO of a travel firm with 400mm customers. I had asked what she sees in China’s youth, the tang ping movement fascinates me. “After the one-child policy, young people each have two parents and two sets of grandparents,” she said. “There is a lot of income and assets behind each child even if they do not work.” It was interesting that she focused on this issue above all else. “And their first priority is travel, their second priority is experiential, music performances, artistic performance.”
Three: “Africa is 3% of global GDP, but we are not 3% of the future,” said a former Prime Minister. “The median age of Africa’s population is 18, and in Europe it is 45. We look like China 30yrs ago, but we have yet to realize our demographic dividend.” China, India, and Africa each have basically the same populations of roughly 1.45bln. GDP per capita in both India and Africa is nearly the same. China GDP per capita is roughly 5x larger. “Now we have the ability to leapfrog into becoming more advanced economies using the latest technologies.”
Leapfrog: Elon left South Africa at 17. Now 4,500 of his Starlink satellites connect some of earth’s most remote locations [map here]. Soon the world will be virtually connected. The cost will collapse, allowing the world’s most powerful software to be accessed everywhere. Children will learn at a quality level and scale previously unimaginable, using AI-enabled individually tailored tutoring. Stranded intelligence across the Global South will be brought online. We don’t know how many geniuses are born in South Sudan per decade, but the number is not zero.
Boiling: The Global South is a concept used to describe the swath of 77 developing nations plus China, situated below North America, Europe, Russia. It excludes Japan, South Korea, Australia, New Zealand. China’s Belt and Road Initiative, which celebrated its 10th anniversary this week, is being built in large part to connect these nations. The Global South represents 85% of world population and 39% of GDP. As it struggles to lift living standards for its citizens, it does so with an eye toward sustainability, as climate change affects these nations in disproportionate ways.
Gaps: The Global South has such a low base of consumption that plans for sustainable development are attractive to its citizens because virtually any pace of progress represents an improvement on current conditions. This stands in sharp contrast to the Global North where sustainable development is seen to require a reduction in consumption, sacrifice. While the Global South plans tomorrow’s infrastructure and greenfield projects, the Global North must deal with stranded capital, redundant costs, lobbying, political resistance. An interesting irony.
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Anecdote: The Saudi desert lay far below, hidden, the dark of night. We would soon pass comfortably between Gaza and Ukraine, conflicts, flashpoints, then across Europe, the Atlantic, home. I’d set out in early August to travel hard, explore, hunt. It had been such a boring summer, the kind of lull often followed by more exciting markets; a time to be moving, listening. Abu Dhabi and Dubai are on fire, cranes spinning like North Sea wind farms.
The fracture between East and West, the Global North and South, is widening in ways that increasingly generate their own momentum. The process will require a massive rebuild of infrastructure, a hardening of critical pipelines, fiberoptic cables, strategic industries, factories, requiring new capital, while stranding old capital stock. The UAE is positioned to bridge this chasm, a neutral place to meet, trade, exchange.
The growing consensus is that a widening conflict would ultimately include Taiwan, unplugging Hong Kong from the West. Singapore will side with the US and be unsafe for those allied with Beijing. In such a world, Switzerland has been the sort of place for adversaries and fierce competitors to safely meet, for the elite to park their wealth, securely, privately. But those times were during periods of conflict amongst the great powers in the Global North. With the emerging Global North/South divide, it appears this new world prefers a more colorful, diverse place, where no matter your nationality, you blend right in. There is an energy, an eagerness, to the place. A concerted effort, coordinated, funded with vast national wealth, to attract talent, industry, execution. All this in the shadow of Saudi Arabia, flush with energy, capital, awakening, asserting.
And while the Global South is still desperate to engage with the West, one gets the sense that our political paralysis and dysfunction has created a vacuum, which our competitors and adversaries are quite eager to fill.