December 7, 2020 BARRON’S 23
ogy will be better, and that’s where the growth is,” or you
can say, “Why would I take that risk? I would much
rather be diversified.” It’s a fundamentally different econ-
omy that runs on its own clock because it has its own
monetary and fiscal policy.
Yet, there are measures under consideration here to
restrict investments in China.
It is hard to stop that floodgate because every investor in
the world wants to be diversified. China’s markets are so
big—it has the second-biggest stock market in the world,
the second-biggest bond market—and that’s not even
reflective of how big an economy it is. Sure, government
pension funds may never be diversified, but for many
other investors it will be the sensible pathway. As for
financial-system risk, the Chinese are particularly well
placed to handle it because everything they own is in
their own currency and their regulatory arms are ex-
tremely strong.
What is the most important public policy issue the
U.S. will face post-Covid?
Can we get past partisanship and get things done? The
U.S. benefits from having strong institutions. Will that be
the case over the next 10 years? If in 10 years we are sit-
ting here and saying we can’t get anything done, no mat-
ter who we vote for, how much will that erode America’s
ability to be a leader in ways that matter to markets?
What kinds of stocks will investors be talking about
in five to 10 years?
Everything digitized will be priced in. What will be new
will be whatever companies Europe and the U.S. are sup-
porting for strategic, competitive reasons—and there will
be a continued acceleration into companies that solve
issues like climate. As everything becomes more digital,
there will be more revenue with fewer employees. We
also don’t know where employment will be in 10 years,
and if it will be through some universal basic income.
What longer-term scars will Covid-19 leave on
investors of your generation?
I suspect Covid will have left us with a sense that really
unexpected things outside of the main analysis can hap-
pen. Studies of pandemics pre-Covid would have con-
cluded that the vast majority don’t have a big impact on
the market. Hopefully, this [crisis] will impact our gener-
ation’s thoughts on climate change. There are a lot of sce-
narios in which climate change isn’t a particularly big
deal, and there are tail risks. We will be more comfort-
able looking at tail outcomes.
You look at a huge amount of data. What will be the
more relevant data points in the future?
Gross domestic product has been a good proxy of human
well-being. If GDP slows, there is misery and policy re-
sponds. There is a recognition that we are at a turning
point in wealthier countries where it’s not as good a
proxy, whether because of inequality, quality of life and
education, or pollution. If you look at the past 20 to 30
years, we have had good GDP outcomes, but the main
quality-of-life outcomes aren’t rising. I can imagine a
future, to take an extreme, where pollution stats are a big
Photograph byFRANCO VOGT