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HALL OF FAMEon April 13, 2012
The average length of time investors hold stocks has been falling from a peak of 16 years in the mid-1960s to under 4 months today. In the 1970s it took $1 of debt to generate $1 of U.S. GDP growth; by the last decade it took $5. Real GDP growth in developed nations is expected to fall this decade to about 2-2.5%. Author Sharma is head of emerging markets at Morgan Stanley and as such spends one week each month visiting other nations looking for the best places to invest. He believes it's no longer possible as in 2003- 2007 to simply bet on rapid growth in any emerging market - those years average 7.2% returns. The amount of funds flowing into those stocks grew 92% between 2000 and 2005, and another 478% between 2005 and 2010. His 'Breakout Nations' provides quick overviews of more than two dozen of the currently most interesting economies for the next decade.

His first major conclusion is that China's growth will slow sharply. Total debt as a share of GDP is rising, its cheap labor advantage is rapidly disappearing, its consumers are already strongly participating in its new economy - spending has increased nearly 9%/year for 30 years, and some estimate China already has a 25% share of the world's luxury market, its 'one-child' policy is now bringing an aging population (average age 37 in 2020, vs. 29 in India and 49 in Europe), its highway network is already second only to the U.S., slightly more than half its population is now city-dwelling (691 million), developers have built 'ghost cities' and malls, and its economy is already quite large - the world's second largest.

Sharma is even more negative on India. Major problems include its bloated government, crony capitalism, a general reluctance of farmers to leave their land, a state much less able than China to provide world-class infrastructure (it's struggling to arrange sufficient grain storage capacity while people are starving, cannot provide reliable power to existing businesses), investment by Indian businesses have decline from 17% GDP in 2008 to 13% and their overseas operations now account for over 10% of overall corporate profitability, public debt/GDP has reached the 70% level, and there are high demands for social welfare.

Brazil, like India, also has high expectations for state-provided social welfare, its currency has risen sharply, growth has fallen to 4% GDP/year during the 2003-07 period, and to combat inflation, Brazil has one of the highest interest rates in the world - leading to an influx of even more currency. Government spending has risen from 20% of GDP in the 1980s to 40% in 2010, while productivity grew at only 0.2% between 1980='08, vs. 4%/year in China. Trucks carrying sugar to Sao Paulo's port wait 2-3 days for lack of space and unloading equipment. Investment levels are only 19%, vs. China's 50%, the average student leaves school after 7 years, vs. 8 in China. New infrastructure spending averages 2% GDP in Brazil vs. 10% in China. The 'good news' is that it now produces 2 mbd of oil and this is expected to reach 6 mbd by 2020.

Mexico's top ten business families control almost every industry in Mexico, with market shares ranging between 60 - 80%. U.S. corporate profits average about 12% GDP, in Mexico they're 25%. Economic expansion there in the last decade averaged 3%/year, students there rank near the bottom in international comparisons, and drug violence has been endemic since 2007. China's average wage was about one-third Mexico's in 2002, now is about 13% less. A new antitrust law was passed in 2011, and resulted in a $1 billion fine levied on Carlos Slim's America Movil over termination fees - it remains to be seen whether he'll pay.

Russia's government closely controls what is said on TV, but not in the papers. Despite a relatively high per capita income, citizens incur frequent power outages. Moscow and St. Petersburg are connected by a modern rail system from Germany, but the average age of the rest of its rail system is 20 years old, and runs quite slowly. Roads and airports are old. Oil comprises about half of the government's income. Personal income tax rates have been lowered to 13%, and average income is up from $1,500 in the late 1990s to $13,000 currently - double that in China. Between 2003 and 2007 growth averaged 8%/year, with Russian companies doing the best. Pensions were raised from 25% of income to 40% after oil hit $140/barrel; state-owned companies account for 56% of the stock market. (Russia owns 51 - 60%.)

Sharma believes it is common for authoritarians in developing countries to extend their power, citing as examples Cameroon, Nigeria, Bolivia, Venezuela, Argentina, and now Russia. (But not China.) Despite Russia having been first into space and has produced 27 Nobel winners in science, mathematics, and economics, it has no global manufacturing companies on its stock exchange. One of its disadvantages is that it is one of the 20 least populated nations in the world, creating logistics challenges, especially for retailing. Nearly 80% of its 100 billionaires (115 in China) reached that status in commodities. Most Russians pay cash to buy a house, small business interest rates run 15 - 20%, its currency was devalued in 1991 and 1998. Bribery is rampant, and direct foreign investment in 2010 was negative. It has one of the world's worst aging problems, and about 40,000 inflow of immigrants/year (mostly Russian-speaking from former satellites).

Where are the best places to invest? Sharma's analysis and reporting continues, and he eventually concludes that the Czech Republic, South Korea, Turkey, then possibly Poland, Indonesia, and Turkey are the best candidates. As for the U.S. - he sees a good possibility of a manufacturing revival in lower wage states after 2015, and believes Germany is also well positioned because it has invested in facilities in low-wage European nations.

Bottom-Line: 'Breakout Nations' provides interesting introductory material. However, readers should recognize that even if China slows down 3 - 4 percentage points as Sharma predicts, it has become so large that even that will represent sizable aggregate progress. Further, China has been making major strides to move up the value chain - buying Western firms (eg. Volvo), locating facilities in the U.S. (Haier America) and Europe, encouraging/forcing American technology firms to locate R&D and manufacturing in China as a condition for selling in China (G.E., Caterpillar, Intel, etc.), is moving into more complex manufacturing (now the world-leading ship builder, producing heavy construction equipment, wind-power generation, developing CPUs; is a leader in biotechnology research), and dominates the solar power industry. It's not going to fade away, even if its growth rate declines.
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on July 11, 2012
I read the book on the two legs of a recent transcontinental flight and liked the content, the method and most of the arguments. It is a well written, but not so well edited text. The book claims that China and Taiwan separated at the end of WWII. While the Japanese left China in 1945 the territories did not separate till the end of the civil war in 1949 when Chiang Kai Shek fled the mainland. On the Chapter on India he cites the example of Bihar and uses the term "lawless Biharis" which was not in good taste. While the recent state of affairs in the state has not been good this way to uniformly brush the citizens of a state does not add value to the book or its message.

These small mistakes apart there are a couple of underlying themes that I felt are important for anyone considering buying the text. Though the book claims to be looking at the long term returns from different economies and the author's predictions about the same he presents a very narrow view of looking at policies and tools.

Let us look at something of relevance to the American audience. The book claims that in the aftermath of the Great Depression the US followed Hayek's paradigm to let the markets clear out ill resources and return to health and the result was that the US economy doubled in size in the next 20 odd years. While it is true that the government or the Fed intervened very little in the early part of the recession in 1929 the recession did not end till 1933 and by then a few things had happened:

1. The Fed intervened and brought more liquidity into the system.
2. The dollar was devalued (by almost 75%) essentially creating inflationary expectations in a deflationary economy.
3. The New Deal was brought in.

The first two steps clearly are monetary stimulus, and the last one is nothing but a fiscal stimulus. The real growth that brought US to the forefront of the world was the war fueled spending during WW II. None of this is a free market and invisible hand policy approach. So the claim that the US economy doubled in size because the policy makers of the day left the market fend for itself are on vary shaky grounds. Putting that as a matter of fact is in my opinion outright peddling of ideology.

The book further claims that the reason for Japan's lost decades even in the midst of one of the largest fiscal and monetary stimuli was that Japan did not let markets correct the problems in the economy. Japan managed to grow out of the ravages of WW II and managed to produce numbing growth with the same model and no natural resources to speak of for more than 4 decades! How come the model is good when it works, and not good when it does not? I think a much better analysis of the Japanese story is in Richard Koo's The Holy Grail of Macroeconomics: Lessons from Japan's Great Recession [HOLY GRAIL OF MACROECONO].

One other point that he does not take into account is that though Japan's economy has not grown at a rapid rate in the last 20 years its per-capita income is very much at par with other developed nations. With the population virtually stagnant and a high standard of living an argument can be made that the people do not care what international investors think of! The difference between Japan and China (or for that matter India) is that China has 4 times as many people as the US: it is not a small state. So the sheer size of the Chinese economy is bound to grow and become larger than the US in our lifetime.

The book insists on using market exchange rates to make comparisons. It makes sense as a selling point if one can use it to paint a more contrasting picture but for a book on international economies not bothering to mention PPP rates does not seem to be an oversight. On the basis of market exchange rates the developing economies may look smaller, but market exchange rates include a lot more information than just the cost of goods and services. So his insistence on using market exchange rates was a bit off-putting.

What I loved about the book was the frequent reminders that leadership matters, and good leaders produce good results. I will talk about the country I know the most of: India. The growth rate of the nation as a whole has come down to about 6-7%, but there are states within the country that are growing at or above double digits: most notably Bihar and Gujarat. The reason I chose these states are that the state leaders are by all counts the most enterprising of all state leaders in the country, but the contrast is that Bihar is the poorest state in the nation, and Gujarat is the richest. But they are both growing at more than 10%. So the small base story does not seem to be very valid on the face of it. Good leaders on the other hand are important. One of the biggest arguments for the slowdown of the national economy has been that the central leadership has been mired with socialist ideals and leaders. One of the most commonly used term in the country today is Policy Paralysis. Time magazine's Asia edition even carried a cover story with the Indian prime-minister on the cover with the title "The Underachiever."

The other thing I loved was a very concise description of modern economic histories of all major developing economies in the world. I am inclined to include the text in my reading list for my International Finance students.

Read the book. It is fun, but take some of the claims with a pinch of salt. When I read something I keep the person's position in mind and make appropriate deviations from the claims. Do the same with this book: the author is a major investment banker! When reading anything from Stiglitz or Reich or Krugman I make it a point to look to the right for better analysis, and when reading Friedman or Hayek or anything from Wall Street I look to the left. I do not claim to be anywhere close to any of these guys but it just makes better sense to keep people's ideological positions in mind when reading their work. As is said there are lies, damned lies, and then there are statistics. We can crank up numbers to prove anything but if we have an idea of where the person is coming from it makes it easier to take a more balanced view of things on hand.
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on August 6, 2012
The author of this book, Ruchir Sharma, is head of Emerging Market investment at Morgan Stanley Investment Management. He is a regular contributor to the Wall Street Journal and the Economic Times. He spends a week per month in a developing country somewhere on the globe 'kicking its tyres' to get a feel for what is really going on with the economy. This is a man who can be assumed to know his stuff - his essential 'stuff' being: 'is this particular economy likely to flourish and should you consider investing in it?'

I am, sadly, not personally seeking an investment home for a few billions of spare cash, but I read the book out of a growing curiosity about what the global economy may come to look like in the relatively near future: about the real likelihood of a decline of the West and the apparently inexorable rise of China and other emerging economies. This book gave me everything I wanted, and more.

Sharma's key point is that it is no longer useful or sensible to talk about 'emerging markets' as one investment opportunity: these markets make up nearly 40% of the global economy and about 15% of the value of the world's stock markets and there are highly significant differences between individual economies. Here's the basic plot: a 'breakout nation' (the ones investors might be especially interested in) is one that can exceed, or at least match, the growth rate for its income class. To get a rounded view of individual markets, Sharma monitors per capita income (so much more revealing than GDP), but also some more idiosyncratic measures, such as the cost of a cocktail or a hotel room (the high relative cost of cocktails and hotel rooms in Brazil, Russia and South Africa suggests that their currency is over-valued, affecting their future competitiveness)and whether local businesses are investing their money at home or overseas (perhaps not a measure of impressive global ambitions, but rather a reflection of mistrust of the economic situation at home).

Sharma's focus on per capita income is especially revealing. For the relatively small economy of the Czech Republic, for example, which has a relatively high $20,000 per capita income, 'breaking out' would require a potentially achievable growth of around 3 to 4 percent. For China, currently still in the region of $5,000 per capita average income, 'anything less than 6 to 7 percent [growth] will feel like a recession.' Sharma drives home the point in his chapter dedicated to the current Chinese economy and its immediate prospects: 'In 1998, for China to grow its $1 trillion economy by 10 percent, it had to expand its economic activities by $100 billion and consume only 10 percent of the world's industrial commodities - the raw materials that include everything from oil to copper to steel. In 2011, to grow its $6 trillion economy that fast, it needed to expand by $600 billion a year and suck in more than 30 percent of global commodity production.' It's a simple point: it much easier to grow fast from a smaller base. Now China`s workforce is becoming more expensive: more middle class and more middle aged, as the country's population growth begins to decline. This leads to one of Sharma's key conclusions (key, that is, if you are a bit over-obsessed with China, as most of us are): growth in the Chinese economy will inevitably slow down,believes Sharma, to maybe 6 or 7 percent. This will not, clearly, be disastrous for China (despite the fact that this may feel like going backwards to the Chinese themselves) and it may calm fears about China's role in the world: Sharma records that a 2011 Gallup poll recorded that 52% of Americans thought that China was the world's leading economy, while only 32% of thought that America's was. America is, in fact, the world's leading economy: China's economy is one third of the size, and average income is one tenth of America's. Concerns about America's economic future, says Sharma, may well be 'over-wrought'.

China is, of course, only one chapter in the book's analysis of world markets. Sharma focuses his microscope on every significant 'emerging' nation. India? Perhaps over-reliant on the 'demographic dividend'; large numbers of working-age people are only an advantage if they can be put to productive work, and India's population has yet to emulate the Chinese model, where higher proportions of the population have moved from the countryside to more productive and higher-paying jobs in urban areas. Brazil? Not enough investment in infrastructure (roads and factories), too dependent on exporting commodities; too quick to develop a welfare state. Mexico? An oligopoly, where state monopolies were sold off and immediately turned into private monopolies. Russia? 'An oil state that has lost its way' - a bit of a mixture of Brazil and Mexico. South Africa? Sill living on the 'peace dividend': the nation's gratefulness for the end to apartheid and the avoidance of what could easily have become civil war. Sri Lanka? Well-placed to benefit seriously from the real 'peace dividend' resulting from the end of their own civil conflict. South Korea? 'The gold medallist': adaptive; innovative; focussed on high-value manufacturing; prepared to undergo brief periods of 'creative destruction' when changing economic circumstances reveal structural weaknesses. An object lesson to us all, in fact.

Two fundamental points that Sharma makes resonated particularly with me. The first is that the West as become too concerned with 'soft landings' and that bringing these about by means of government-sponsored economic measures tends merely to prolong economic agony, whereas short sharp shocks (the South Korean way) can be invigorating. The second is that free-market democracies are not the only route to economic success and that several command economies have been remarkably successful. The secret, however, he suggests, lies in the dynamism and vision of key leaders (for example, China's arguably pivotal reformer, the late Deng Xiaoping).

There is even an uplifting conclusion to the book. China's current insatiable appetite for resources (oil, metals etc) will soon tail off - and anyway, as Sharma reminds us, China is mainly using resources that would have been used elsewhere, before so much manufacturing moved to China. Sharma believes that current pessimistic fears about the exhaustion of the world's resources is over-blown and that a 'commodity.com' bubble can be clearly seen in the fact that the daily volume of trades in energy futures (speculative bets on the future price of energy) is twenty-two times higher than the daily global demand for energy: our fears about future resources are driving a fever of speculative activity that will surely end in a commodities price crash. This will be good news for many of us - but not, for example, for commodity-based economies such as Russia and Brazil. In the meantime, as more and more economies become slowly wealthier, we will all have more neighbours to sell things to.

Please do not imagine that I have been able even to mention every interesting fact and idea covered in this book. It's a bit of dense read; one can sense its origins as a collection of 'special reports' for the Wall Street Journal etc, but it has been well transformed into a good read, with interesting bits of colour from Sharma's obviously jet-setting lifestyle. I had a mild (well, severe) attack of status anxiety when Sharma recounts that, when he was reluctant to fly to the previously Tamil rebel region of Sri Lanka in the only-available single-engine helicopter (a model with a bit of a reputation for crashing) his 'accommodating hosts arranged for the air force to take me up in a twin-engine helicopter.' Remind me to try that trick if I ever holiday, tourist class, in Sri Lanka, as I hope to. I guess if Mr Sharma likes what he sees in a country, that could be rather more significant in terms of future inward investment than if the Gifford family takes a fancy to a place.

I have one very minor gripe: the book's few photographs are slightly randomly positioned in the text, leading to sudden geographic confusion. Thus a photograph of Manila crops up in a section on Indonesia; the section of the Philippines comes several pages later. The index confirms that a photograph of Nigeria's burgeoning film industry, `Nollywood' is on page 186, whereas the reference in the text comes full 25 pages later. Maybe it's my newspaper and magazine background: I like my pictures to illustrate the text I am reading. But I am being pedantic.

In the meantime, having small-mindedly moaned about some interesting photographs and failed utterly to list every interesting area covered in this book, I'm off to read it all over again.
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on May 19, 2012
The book is poorly sourced and wrong in so many areas. For example:

Page 41: "In 2002 Google purchased a California-based social networking site called Orkut, to compete with Myspace and Facebook in forty-eight languages..."

FACT: In 2002, Facebook and Myspace did not exist. Facebook, founded in Feb. 2004, and Myspace, founded in Aug. 2003, came between Google's in-house launch of Orkut in June 2004. Yup, Google didn't even buy a "California-based social networking" company called Orkut. Orkut Büyükkökte, an employee at Google, built the site while working for the company during his free time in 2004 (not 2002).

Page 109: "In the early years of the Depression the United States followed the advice not of Keynes but of the then-more fashionable Austrian economist Friedrich Hayek, who counseled that the job of government in the face of a downturn was to stay out of the way and let market forces liquidate the deadbeats and deadwood in the economy. The result was a severe U.S. contraction and 25 percent unemployment rate, but by 1950 the economy had nearly doubled in size compared with the 1929 peak. The pain had unleashed a boom, just as Hayek said it would. Contrast that to Japan, which responded to its severe recession in 1990 with every possible stimulus and bailout known to Keynesians (and then some), and today has an economy only 20 percent larger than it was in 1990."

FACT: He's a Hayek apologist! Where he gets it so wrong: "...but by 1950 the economy had nearly doubled." Sharma credits this "doubling" to Hayek counseling the government to stay out of the way, but in reality, the economy recovered after the government increased spending (a Keynesian idea) to support World War II between 1939 to 1945. It was government spending from World War II, not Hayek who spurred the economy after the Great Depression.

FACT: Japan followed the economic advice of Milton Friedman, not John Maynard Keynes, to solve the nation's imbalances in the 90s. It's important to understand the difference between monetary stimulus and fiscal stimulus in order to catch the lie in this case. In the 90s, as Japan's economy started to tank, the government, instead of boosting government spending, resorted to lowering the interest rates and using other monetary stimulus (not more spending) to control the supply of money. This failed. As a result, Japan's government proposed irrelevant Thatcherite supply-side changes, including privatizing the post office. This also failed. In fact, Japan is only now starting to grow, at a rate of 4.1 percent as of May, after the nation ignored Friedman and listed to Keynes by boosting fiscal spending.

These discrepancies, in some cases small (like Orkut) and others large, make me not trust the author one bit. The entire book is poorly sourced, and misinformed. It makes me question his credentials to work for Morgan Stanley because he's clearly and poetically dumb.
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on May 13, 2012
Breakout Nations is an overview of how many of the major emerging markets are currently faring. It discusses China, India, Brazil, Mexico, Russia, Poland, Czech Republic, Hungary, Bulgaria, Turkey, Sri Lanka, Thailand, Malaysia, Taiwan, Korea, Vietna, South Africa and includes a discussion of Africa as well. Even more countries are covered but the above slightly more comprehensively with special chaperts dedicated to China, India, Brazil, Mexico, Russia and Turkey. The author is responsible for investing in emerging markets for Morgan Stanley and is well positioned to give a narrative on most of EM. The commentary is well thought out and the author does well to poke holes in some common misconceptions. It is important to remember though that the author's perspectives are just his own beliefs about the future, most of what he writes can be debated vigorously. I enjoyed reading the overviews as the author is concise and articulate, but this is but one of many perspectives and the author does not go into details to defend his views.

Being responsible for important asset allocation at a major wealth management firm naturally means the author will have to take views and make decisions based on their beliefs and given their knowledge. The author believes that much is at risk in Brazil, India, China, Mexico and Russia. For him, he favours Korea which has managed to move very much into the category of innovative countries focusing on consumer demand, which the author makes the point of showing that consumer goods is where the long term growth is. He focuses on distribution of wealth, where retained profits are being invested, what the governments are doing and the nature of their trade and reform agendas. These commentaries are very straightforward to read and much information is included in a concise fashion. The author discusses what has been working for economies and spends time considering what might go wrong for them in the future.

Despite enjoying much of what was written, there is a fair amount of opinion that is marketed as fact and there are many points he makes that the author's own commentary discredit. In particular the author has been making the argument that easy monerary policy is just fuelling speculative commodity demand and has been very detrimental in the recovery. That is speculation, not fact and there is no counterfactual we can point to. Commodity speculation might have been increasing but there has been fundamental demand growth in commodities due to Chinas focus on FAI growth. Monetary policy no doubt can impact the price but the degree is not in the least bit obvious. Another example of reasoning the can be discredited is the observation that growth in post war periods is higher than average (this is obvious isnt it?) and then makes the comment that markets dont price that growth aspect properly, several pages later there is another statement concerning the probability a nation goes back to war having recently emerged as being 40%. That would explain why people find if hard to buy equity in countries recently emerging from war wouldnt it? The author's narratives are fun to read and he debunks much that people talk about when it comes to emerging markets. The economic commentary is suspect and much of what the author states with confidence is just his opinion for which many with much evidence strongly disagree. Consider the example of Turkey, a country the author very much is a fan of which has recently been the target of the economist (after this publication) as well as the subject of a comprehensive GS piece in which on robust statistical measures it has significant risks or consider Korea which has large demographic issues which it faces and high personal debt levels which the author casually mentions. Which is right, who knows, but the authors views are definitely not unbiased and one should not invest in his favorites without doing more research.
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on September 19, 2014
An interesting book by Indian born economist Ruchir Sharma, the head of emerging markets at Morgan Stanley on which emerging countries he believes will be able to break out on the new few years.

Sharma is bearish on Thailand (too much political instability – this was written before the recent coup), Malaysia (the government is increasingly hostile to market mechanisms), Taiwan (the economy is centered on the export of a few products, like computer components, in which companies don’t have a lot of market power), Mexico (the economy is in the hand of just a few businessmen, more interested in gaining rents than in generating genuine growth), Brazil (there is still a lot of macroeconomic instability and the country has not invested in the infrastructure needed for future growth), Russia (based on natural resources and dominated by oligarchs) and South Africa (the economy is too regulated, and too much of its wealth is concentrated in too few white hands). In the emerging markets of Eastern Europe, he likes the future prospects of Poland and the Czech Republic over that of Hungary. He thinks China has already consumed all the low hanging fruit and will be growing at more normal rates in the future. Regarding Vietnam, while admitting the recent years have seen large economic growth, he doubts the country will be able to turn into a second China (its education system is poor and its politicians are less able than the Chinese). India needs to tackle crony capitalism if it wants to pursue a sustained path of high economic growth.

He is optimistic about South Korea (almost the only country, except some oil producers, that have graduated from a poor to a rich economy in the recent decades), Turkey (he praises president Erdogan for leaving behind the long conflict between the secular military and the Islamic masses), Philippines (he believes the new government will be able to put forward reform), Indonesia (among the best run nations of Southeast Asia) and Sri Lanka (now that the long civil war is finally over, he believes the economy will be able to grow).

Sharma believes that as the decade-long commodities boom winds down, the big winner will be the Western world, who will have to pay less for the commodities it buys and especially the United States, who remains at the frontier of new technological products. If you read regularly the world economic news, you won’t be reading here something terribly new, but it is an interesting read nonetheless.
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on June 22, 2012
This was a great book and there was lots to be gained from reading it.

First, the text came in at 255 pages with supporting charts and a good index. (With a total of 14 chapters, that works out to 18 pages per chapter-- enough to read on chapter on a lunch break.) Sharma got in, said what he had to say, and then wrapped up (both in each chapter and in the book as a whole).

Second, the author had a good and clear writing style. In no way did his prose come across as stuffy or pretentious.

Third, the book didn't come across as some abstruse academic study/ analysis. It was (and felt very much like) the writing of someone that had real life experience on the ground and wrote his book from actually being to the places that he went to and paying attention to the happenings there. His index and bibliography were very short (only about 4 pages) and most of them were drawn on articles from sources such as WSJ, Forbes and internet articles.

In all these three respects, the book was distinctly anti-academic. (Not such a bad thing, since it is said that the only reason for professional and academic economists is to give the weather forecasters someone to laugh at.)

The most resounding (to me) take away messages of the book were:

1. Regression to the mean. Nations that are growing now can't always grow forever. This topic has been visited many times by many different authors, but a restatement of it never hurts in light of the fact that so many people seem to think that something new is happening every time that some economy that seems to defy gravity seems to come up (think China).

2. The long term predictions of experts are no good. We also knew this as well. He gives a different spin on something that was taken up by Nicholas Taleb (he of The Black Swan: Second Edition: The Impact of the Highly Improbable: With a new section: "On Robustness and Fragility" and Fooled By Randomness), but in the context of Development/ International Economics (rather than simple Macro/ Stock Markets).

3. No, the business cycle is not going to be dis-invented. People thought that they have done it before-- and they have been wrong. (Margaret Thatcher brought up this point something like 20 years ago in Statecraft : Strategies for a Changing World.)

4. The increase in the price of commodities is a third boom and is something that is just like other booms: First the Japanese boom-- and bust. Then the internet/ technology/ dotcom boom-- and bust. The discussion of the commodities boom is done in Chapter 13 and is over a tight 16 pages that can be reread over the course of half an hour (to glean any missed information). It's not excessively bloated or technical. Sharma creates something like his own Big Mac Index with his "Four Seasons Index" (p. 233) and he estimates how much room nations have to grow (and who could become the next breakout nation) by how under-priced their Four Seasons hotel is relative to the emerging market average. I think that this was probably the best part of the book.

5. p. 221. "No nations development path can be understood through a simple set of rules." Amen! We knew this, but a pithy book like this that iterates the idea never hurts.

The book also has some very brief history of countries. Nothing that is overwrought with detail, but just enough to put together a coherent story of why country X has result Y whereas country A has result B. (For example: The author gets into a discussion about the reasons for the greater technical competence of the Chinese leadership vis a vis the Vietnamese leadership--- even though both have the same economic system/ type of government.)

He also let a bit of air out of China sails by point out that: 1. It's very easy to have huge growth from a small base; 2. It's less easy to have large growth from a large base; 3. China has an aging population that is going to drag on growth. I am not sure that I agreed with his assessment of the "huge consumer market" in China (I live here, after all), but it didn't detract that much from the book (which was meant to be expository and not overly analytical).

I bought this book new, and it was worth every penny of the new purchase price.
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on April 17, 2012
This is quite the book to read both for seasoned investors and common people. Global economic order is undergoing rapid change. Ruchir Sharma is best placed to tell us what the future holds. Long-held views about so-called emerging markets no longer hold good, according to him. if anyone knows the subject, he ought to be the one, considering he is among the world's most prominent emerging market investors. He tells us his views in the simplest possible manner and his writing reveals his deep insight into the wheels that turn the developing nations of the world. A must-read for all. In one word: Unputdownable.
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on March 6, 2014
I enjoyed this book and the view it presents. It is a a very nice walk through of a large number of countries. The data in it might be a little dated as the main book is from 2010, but it ends with an update. I think more importantly than the current data is the thought process that he applies. He tries to show how to use it consistently across countries to understand the macro setting and how it impacts the chance of a country wide breakthrough.

Two caveats on my rating. First, much of the analysis and framework in the book is presented as being "fact". I would do the same in writing a book (people are, after all, looking for your view). But as a reader I think it is important to keep in mind this is the process followed by one very experienced individual. A careful read shows that even he is saying things can change immediately and many other things will matter. But in much of the book it would be easy to drift into thinking he is providing "the answer".

Second, I felt the book was a little unstructured at times. It would have helped to have more of the structure laid out in the front of the book so that as I read I had some idea where we are headed. I think there is a very nice structure there in many parts of the book - he starts with a few well known countries and then uses them as benchmarks as we explore much more of the world - but it is only after reading it that I see the structure. It reads a little like a bunch of individual analyses that he then put together (and given his acknowledgements thank an editor for a magazine he publishes in, that may be the basis).

Neither of these detract so much that I dropped a star. Rather, I think they would be helpful for readers to know so they can get the most out of what is a very interesting book.
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on September 25, 2013
I had the good fortune to pick up this book about 6mos after it was published in summer 2011. It was a great read then - very interesting approach to SEEING emerging market countries not just analyzing them on a spreadsheet. There is nothing dry about the book. It's a fun to explore his thought process. I have worked in financial product sales for over 20 years and i have read a lot of research over that time. Ruchir Sharma looks at economics in uniquely personal way. For example, did you know that the cultures of India and Brazil are so in alignment that they share some of the same tv programs because popularity is assured in both those cultures (but no where else).

Mr. Sharma looks deeply at the politics of countries. What trends in political spirit are evolving? When a country has the same leader for extended periods of time ( think Erdogan and Putin) , the government starts out reform - minded and ends up lead by a megalomaniac who's only ambition is to stay in power. Turkey in fact had a regime change in the early half of the 20th century that rendered much of the population 'illiterate' when the official language changed.

Reading this book, you will learn a bit about the world around you (if you are not in finance) and if you are.. you will learn a new way of deeply understanding the path that various countries will take. What is more remarkable is that as of 2011 , he had correctly predicted the future of many countries. Since i read the book, emerging markets have come on surprisingly hard times and their worst weaknesses have been exposed. This is making asset managers all over the world re think their long term investments and that will change the face of the future. I can even draw the conclusion that for the future, the USA is the 're-emerging' market to watch.

Mr. Sharma travels a lot (1week a month) and its fun to follow his shifts in view since writing the book. He has said in text that he is now focused on Thailand , the Philippines , Eastern Europe and Mexico. Don't worry while reading that the view has changed, but do take in the 'method' by which he arrives at his views. I have sent 25 copies of this book to my various clients and it's a great read.
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