This week’s readings/links:

• Jonathan Ruffer: Investment review (June 2020).
• Oliver Hughes: The CEO of Tinkoff Bank on how to build a profitable digital bank.
• Ben Cleary: Don’t fight the Fed, buy commodities instead.
• Michael Sonnenfeldt: Investing during the pandemic; what should I do with my money considering all of the volatility & uncertainty today?
• Better Mousetrap podcast: Interview with David Halpert, the founder of Prince Street Capital (some of my notes are below – paraphrased, any mistakes are my own).

An interesting conversation about the subtle shift in how technology, globalization and finance are interacting with each other. He discusses the theme of digital decolonization – while US and Chinese technology companies have expanded into other markets (e.g. Southeast Asia, South Asia) in recent years, there is a growing awareness among some developing countries that their own cultures, values and economic interests may not necessarily be perfectly aligned with those of cross-border foreign technology companies.

For example, one area of potential misalignment relates to the ownership of consumer data, and several governments are now regulating how data can be stored and transported across borders. This topic has become more prominent in political and financial discourse recently, including in countries such as India and Indonesia.

He thinks this is giving rise to a business opportunity for local entrepreneurs to build national and regional champions in the technology space. From an investment perspective, thinking about technology on a local/regional rather than global basis is becoming an important thematic. 

There are several factors that are contributing to this localization trend:

• Certain countries have built political obstacles to foreign technology companies getting involved in their domestic ecosystems (e.g. China, Russia, Iran, increasingly the US).
• In other cases, it is nothing to do with the government, just the private sector being quicker to address the needs and preferences of local consumers. For example, the team at Mercado Libre have managed the business and finances well, built up significant market share in Latin America and were able to attract enough capital from US technology investors and strategic partners. They have now built a moat in their region that should be pretty durable against Amazon.
• The first generation of local and regional success stories are helping to create a virtuous cycle in terms of developing their respective startup ecosystems. More expertise and talent is attracted to the market, aspiring entrepreneurs have role models, venture capital firms are more willing to reinvest some of their proceeds back into these markets after a successful exit. Support of the government and a well-functioning, efficient and corruption-free legal system are also important factors in the ecosystem.
• Mobility challenges for global talent from developing countries – if it is harder for immigrants to move to the developed world (e.g. the US, situation with Brexit), this perhaps leaves more talent and educated young people to work on interesting projects in their home countries. This is in contrast to the last 20-30 years, where there has been a real brain drain issue, especially relating to engineering and technology talent who have left to work in Silicon Valley, Japan and so on. 
• From an investor perspective, the digital decolonization thematic can perhaps be viewed as a form of impact investing. Seeing local technology companies prosper is considered part of national development – not just the cultural pride aspect but also economic opportunity for local people (e.g. Grab, Go-Jek in Southeast Asia).

Apart from the localization and adaptation trends discussed above, there is also an opportunity to invest in technologies that will leapfrog those of developed markets. Cryptocurrencies, for example, may well be a story that is more material outside of the US. But there are also more intermediate technologies – the example everyone is familiar with is mobile payments. Many developing countries are far ahead of the US in terms of adoption and use. He thinks telemedicine might be a bigger thing in Asia than in the US. You have to look forward and think about what businesses and business models will succeed in the developing world.