extended periods of time.”
Soros “didn’t interfere in the running of their accounts, because that’s not the way we operate,” so he set up an account to counterbalance their positions, which he ran himself. “Basically, it involved a large amount of hedging. It was neutralizing market exposure [of his external and internal managers] and then taking market exposure on the negative side.” Soros was not only unfamiliar with fancy new derivatives; by his own admission, he didn’t know much about individual stocks anymore, either. So one of the world’s great investors set about protecting himself from the coming crash with tools so simple your average booyah Jim Cramer watcher would scorn to use them: S&P futures and other exchange-traded funds. He made simple bets, too: “Basically, I went short—the stock market and the dollar.”
Soros didn’t get it exactly right. “In a time like this, where the uncertainty is so big and the volatility is so big, you must not bet on a large scale,” Soros told me at the end of 2008. “One of the mistakes I made is that actually I bet too much this year, too large positions, and therefore I had to move in and out to limit the risk. I would have actually done better had I taken my basic positions on a smaller scale and not allowed the market to scare me out of those positions. I would have done much better.”
That’s because Soros’s radar for revolution is a way of thinking about the world, not a foolproof algorithm. “That’s what makes this macro investing difficult,” Anderson told me. “People like George can see the disequilibrium, but there is always the question of what catalyst is going to cause the change.”
The biggest disequilibrium of the twentieth century was the economic gap between the developed Western economies and everywhere else. And the single biggest catalyst for change was the collapse of Soviet communism. But the opportunities created by that monumental revolution weren’t limited to Russia. Across the Warsaw Pact as well as in Asia and in Latin America, a global wave of economic liberalization opened up huge opportunities for the people who figured out how to respond to revolution. As in the former Soviet Union, this wasn’t something you could teach in business school—talent and an appetite for risk were essential, but most of all you needed to be in the right place at the right time.
Azim Premji is the chairman of Wipro, the pioneering Bangalore-based IT company. The first revolution in Premji’s life was personal. He was studying engineering at Stanford University in 1966 when his father died suddenly. The twenty-one-year-old had to drop out of college and return from Palo Alto to Bangalore to run the family vegetable oil company. Premji turned out to be an energetic, talented, and omnivorous businessman. A decade after he took over, Wipro was still producing vegetable oil, but it also made lightbulbs in a partnership with GE, as well as shampoo, soap, and hydraulic cylinders. The really big break came in 1978, when IBM was forced out of India. Premji saw the opportunity to return to his first passion—computer science, whose pioneers he had met as a student at Stanford. By 1991, when Manmohan Singh’s liberalization opened up India to the world economy, Premji and Wipro were perfectly poised to seize the opportunity—and the Indian outsourcing revolution was born.
“I was very lucky,” Premji, today a dignified patriarch with a quiff of white hair, told me when I asked him how he did it. “I had the right education, at the right moment, in the right country.”
“India is growing at 8 percent per annum,” explained Ashutosh Varshney, the Brown professor who spends half his time in his hometown of Bangalore. “But the main point was that when an economy grows at 7 to 8 percent, then some sectors grow at 18 to 20 percent—8 percent is an average.”
If you are good at responding to revolution, you figure that out and start a business in one of the 18 to 20 percent sectors: “It is the possibility of multimillionaires overnight.”
You hear the same story in China. Lai Changxing was born and raised in a small village outside Xiamen, on China’s southeast coast, less than two hundred miles from Taiwan.
When in the early 1980s Deng Xiaoping told the brutalized Chinese people it was okay to make money, Xiamen was one of the first provinces where the market experiment was launched, and Lai responded to that revolutionary opportunity. Starting with an auto parts company, by the middle of the next decade he had diversified into everything from umbrellas to textiles to electronics—and he had become a billionaire.
“You could start a business in the morning and make money by the evening,” he told a journalist. “Everything was so free and open back then that everyone had lot of businesses. You would be stupid not to.”
If you have the right skills and the right connections and the right appetite for risk, surfing the wave of emerging market revolution is thrilling—and even feels easy.
David Neeleman is a serial entrepreneur. He has founded two U.S. airlines and a touch-screen airline reservation system that was acquired by HP. When Neeleman was eased out of the CEO’s chair at JetBlue, his most successful creation, it was less than a year before he announced the launch of a third big entrepreneurial venture. That was no surprise—starting companies is simply what Neeleman does. And it made sense that it was an airline, the business Neeleman knows. But for his third big play, Neeleman left the United States for Brazil.
“Well, the U.S., like I said, it’s kind of tapped out,” Neeleman told me in the fall of 2010. “We’re growing [in Brazil], us and our competitors, 25 percent a year. That’s three times GDP growth, which in the first half of last year was almost 9 percent. And we’re growing traffic 27 percent. So that’s exciting. You know, if I was here in the U.S., we would be still trying to fight it out with other established carriers, whereas down there, I’m flying routes that had never had nonstop flights. We will be serving cities that haven’t had airline service for years.”
That’s the real secret of the emerging markets. If you aren’t scared of uncertainty or of leaving home, making money in these frontier economies is a lot simpler than battling for 1 percent more market share in the developed world.
“The next ten years is going to be the most exciting time in our lives! The Indian economy will double! You will only see that once in a lifetime! It will be incredible!” Tejpreet Singh Chopra, then a forty-year-old Indian businessman, told me in the spring of 2010. A few weeks before we met, he had taken the bold decision to jump from the managerial aristocracy to try to become one of the entrepreneurs who have figured out how to respond to the emerging market revolution.
Chopra had just the right inside/outside CV. Born and educated in Chennai, India, he landed his first two jobs working for Lucas Diesel Systems in the UK and France. He got his MBA in the United States, from Cornell University, and spent the next decade at GE in Stamford, Connecticut, and Hong Kong, before moving back to India. Chopra met his wife, a fellow Indian, while he was working in the United States; she has a law degree from NYU and worked as an M&A lawyer for white-shoe Wall Street firm Weil, Gotshal and Manges.
In 2007, when he was just thirty-seven, Chopra was chosen as the first Indian to run GE’s Indian business. That job put Chopra at the center of the globalization and technology revolutions, which are transforming our world as dramatically as the industrial revolution did two centuries ago.
Consider the Mac 400, a portable electrocardiograph made and designed in India in 2008, which Chopra touts as one of the flagship achievements of his tenure in the GE India job. The Mac 400 is a cheaper, cruder, and lighter version of its American parent—it weighs less than three pounds, rather than fifteen; sells for around $800 (already barely half of the $1,500 it cost when it hit the market), rather than $10,000; and costs $500,000 to develop, rather than $5.4 million. Eight of the nine engineers who created it were based at GE’s Bangalore research lab.
Selling Western technology and brands into emerging markets is an old story. So is selling cheap emerging market labor—in the form of manufactured goods, electronics, or commodity white-collar services like call centers— into developed markets.
The Mac 400 is an example of the next stage—emerging market engineers, employed by a Western company, creating a product inspired by a Western prototype, and redesigned for emerging market consumers.
The world’s smartest megacorporations—GE, Google, Goldman Sachs—are finding ways to profit from the great economic shift of our times. The biggest winners, though, are individuals, not institutions; globalization and technology have dramatically lowered barriers to entry, and the beneficiaries are the people smart enough and lucky enough to make it on their own.
Chopra was aware of the perks of working for a highly respected global behemoth like GE—“If you are the CEO of GE, anyone anywhere in the world will take a meeting with you,” he said—but he couldn’t resist the lure of responding to revolution.
Following the model of Nucor, which revolutionized the U.S. steel business by building mini-mills, Chopra is working to create an Indian power company based on small, twenty- to forty-megawatt plants using environmentally friendly sources of energy. With Bharat Light and Power, his new firm, Chopra is hoping to surf at least three revolutionary transformations at once. The first is the shift from big factories to small ones. Nucor—one
