Updated January 2019
I’ve been employed to analyze geopolitics and the world economy for about twenty years now, which means, alarmingly, I’ve got a track record. (Most of my publicly-available articles are now posted on this blog.)
What did I get wrong, and what did I get right?
The worst calls
My worst call has been Turkey. In a 2004 editorial, I contended that Turkey was on the path traveled by so many Eastern European states: convergence with Western Europe. I even invested in Turkey, I was so sure of this call.
To be fair to myself, the problem arguably wasn’t with Turkey: to my surprise, the EU got cold feet.
But even after that I doubled down on Turkey with another article predicting a turnaround. This is an example of what Daniel Kahneman would call irrational decision-making based on “loss aversion.” And then Turkey became the epicenter of an emerging markets crash.
C’mon Turkey! This is your year!
Starting with my 2003 book The Kimchi Matters, co-authored with Marvin Zonis and Dan Lefkovitz, I’ve continually been predicting trouble in China. But, China just keeps on booming.
I did get some things right: in a 2004 editorial, I predicted that China would get into trouble by stimulating its economy too much if it faced a downturn. That is indeed what happened during the 2007-8 global slowdown, and China now faces a severe debt problem as a result.
So I doubled down on this prediction as well.
But there’s no denying that, blithely disregarding my sniping from the sidelines, China is still booming today. Good for you, China.
The best calls
In 2004, I wrote an article forecasting that Hugo Chavez was going to adopt increasingly radical socialist policies. And he did – subsequently expropriating foreign investments in oil, cement, agriculture, manufacturing, hotels, banking, electricity, steel…
I’m less proud of writing that “communism is a card that doesn’t easily go back in the deck.” My 30-year-old self should have been forcibly prevented from using metaphors.
2. Oil and expropriation
My thesis at the University of Chicago in 1997 was on the link between oil price shocks and expropriation. After I graduated, I submitted the thesis to an academic journal, but it was rejected.
I have had the belated satisfaction of being proved right by history (even if my theory was, as one peer reviewer noted, “underdeveloped”). In the 2000’s, oil prices shot up. Just as I had predicted, countries once again engaged in expropriation.
In 2005, as oil prices were beginning to rise (prices were at $60 per barrel at the time; they would rise to more than $100 a barrel), I wrote an editorial predicting what was in fact about to happen, based on my earlier research.
When economists from Niall Ferguson to Martin Wolf were saying that the Eurozone would come apart, in 2011 I was giving public speeches explaining why it would stay together. (I am less proud of my hairstyle at that time. If only I could go back in time to force my younger self to get a haircut.)
More recently, I was again right on Grexit when most economists were wrong.
That said, I put my money where my mouth was, investing in Greece just before the EU bailout decision, and so far, despite the decision of Greece to stay in, this investment has utterly failed to pay off for me (mostly due to movements in the dollar).
So I’ll stick to geopolitical and economic analysis, and leave playing the markets to Wall Street.
4. Political risk in advanced economies
Around 2015, I started shopping a book about rising political risk in advanced economies. No one was interested. “Can’t happen here,” they said.
I also published a piece on my blog (Political risk has come home) and an article on managing political risk in advanced economies in the Journal of Risk Management in Financial Institutions.
And then: Brexit, Trump, Italy’s populist government, trade wars … and it just keeps getting better.
I told you so!
5. The tech backlash
In a 2016 article for the Harvard Business Review, I forecast a rising political and regulatory backlash against the tech sector “monopolists,” which has now materialized. As of autumn 2019, even the sky-high valuations of the tech titans had begun to be affected by the fear of regulation.
The article also forecast, accurately, how the tech titans would respond, by calling for more regulation of their businesses (which is costly, but helps shore up their dominance).
Hold onto your seats: if the article is right (and it has been so far) this backlash is just beginning.
6. The emerging markets crash
I got Turkey wrong, but I was right on emerging markets overall: in a series of speeches and articles in 2015 and 2016, I predicted that rising US (and eventually EU) interest rates would cause a crash in emerging markets, which duly materialized in 2017 and 2018.
I suggested that this crash would lead to a wave of sovereign defaults, which has so far been limited to sub-Saharan Africa. So far.