Exclusive Interview with Legendary Investor Jim Rogers
The internet has a depressingly low signal-to-noise ratio, making it difficult for investors to find high-quality, unbiased sources of information and insight. One of the few Iâve found consistently reliable is Jim Rogers, because he combines three important traits that I look for: First, he's an amazing investor with a truly remarkable long-term track record, one worth emulating. Second, he's an iconoclast who ignores the crowd and thinks for himself, a rarity in the investing world and a necessity for anyone who wants to escape the fat part of the bell curve and outperform the masses.
Here's a transcript of a conversation that InvestorGuide CEO Tom Murcko had with him last week about investing, business, and life.
Tom Murcko: Thanks for taking the time to chat with me today. I just wanted to share with my audience some of your thoughts and ideas. So if you're ready I'd like to just jump right in with the questions.
Jim Rogers: Yes, absolutely.
Tom: You've said that the U.S. is making some of the same mistakes Japan did and might be headed down the same path, toward another lost decade or even two. Is there anything that can be done to prevent this?
Jim: Oh sure there is, you can always take different courses of action, you can try anything, the question is what's the right course of action. The reason I said that is, in the early 1990s, Japan faced problems such as we're facing now, and they refused to let people go bankrupt, they propped up the banks, they propped up a lot of companies, and they came to be known as the zombie banks and zombie companies, and as you know the Japanese talk about the 1990s as the lost decade. But now you're talking about two lost decades. Their stock market is down 75% from where it was 23 years ago. That is not a typo, it's down 75%. We're going the same way. We refuse to let people go bankrupt, prop up everybody in sight, and the problem with that is you're rewarding incompetence, you're bailing out incompetence, rather than allowing new people, new energy, new capital, and new competition. It's called the green shoots, from Joseph Schumpeter. One of the great beauties of capitalism is creative destruction, which allows the green shoots of new energy, and new capital, and new ideas to develop. They're not allowing that in the United States these days, just as Japan refused to allow it for the last 23 years.
Tom: I noticed in your email signature you listed a site called govathome.com. Can you say a little about that site's mission?
Jim: Well, when I wrote my first book Investment Biker back in the early 1990s, among several suggestions, one was that instead of sending congressmen and senators to Washington, we let them stay at home and vote from home. Instead of spending their days and nights interacting with lobbyists and with each other, they'd spend their days and nights interacting with all of us. And they'd vote at the local high school gym or the mayor's office or something. Now in 1789, of course you had to send everybody to the same place, and Washington was halfway for most people. But that's 1789. If you were going to establish a government or anything else in 2015, you would not set it up that way. We now have computers, we have efficient home mail delivery which they didn't have. And you would do it in much different ways now. You would have computer conferencing, etc. We could do it now, as I said, if you were setting it up now, you would probably do it that way. Any 18 year old with half a brain would set it up that way, better than all of the 78 year-olds who are running Washington, D.C. I just suggest that we make the congressmen stay home, sure they can go to Washington two or three weeks a year if they really feel they have to, but if the lobbyists had to come see the congressmen, and they had to do it exposed to all the voters, we'd probably have much different laws, we'd have a much different government, we'd all have much different lives. Now we send 535 senators and congressmen to Washington, where they're immediately descended upon by lobbyists and bureaucrats, and they have their own agenda, but it's not the same agenda that most voters in America would even comprehend, much less support. So it's a suggestion to change with the times. Is it going to happen by 2015? Absolutely not. I don't know if it'll ever happen. Maybe other countries or other generations might do something like that.
Tom: It sounds like you're saying that our political system has a systemic problem, it has too much inertia and can't change... even if smart people agree that there's a better way, the switching costs are too high and we can't get from where we are to where we want to be. You've said something analogous with technology, about how emerging countries are leapfrogging the United States.
Jim: Certainly in some ways, yes, I mean if you go to some countries now, people don't have telephones with land lines, they just completely leapt over that whole thing. We all used to have telephones with copper wires coming in. Most new countries don't have land lines, they don't have all those copper wires, et cetera. They don't need it, they just completely leapt over all that. That's been the story throughout history, the way people have developed, something new comes along, people develop it rather than go with the old ways, and people still stuck with the old technology and the old ways usually have to change or get passed by.
Tom: Throughout your investing career you've consistently spotted trends before others, including the housing bubble and the financial crisis. How are you able to do this? Is it about knowing what sources of information to pay attention to and which to ignore, or are you able to synthesize information into wisdom in a way others don't?
Jim: I don't know, but I do know that if something's too good to be true then it's probably not true. The idea that we could all buy five or six houses with no job and no money down, and then that those mortgages could be sliced and diced and made into even more miraculous AAA credit... Looking back, even at the time it was incomprehensible to me that people would believe that. But looking back on it, I don't think anybody could comprehend how that happened, but it did. You often see that. Back in the late 90s there was the whole dot com thing. Everybody was talking about a new era. Even the Wall Street Journal started to capitalize New Economy, you know, everybody got sucked in. But if you have any knowledge of history, you know this can happen throughout history. All bubbles look the same, all absurd policies look the same, and they all lined up. And people always say the same things, they say it's different this time, they say it's a new economy, a new era, whatever, and it never is. All these absurdities always end up badly. And by the way, the Wall Street Journal stopped capitalizing New Economy in the early part of this century, because even they came to realize, oh my gosh, it was not a new economy, and it never is a new era. Mankind doesn't change very much at all.
Tom: It seems like a lot of it comes down to human nature and human psychology. In a bubble, some don't realize it's a bubble, but even those that do are jealous of their neighbors making so much money in whatever's hot right now, greed overwhelms fear and they can't resist buying regardless of cost.
Jim: Well yes, all of that is correct. But I never know whether people really believe some of the absurd things they say. I don't know whether they're fools or liars. I'm stunned sometimes with some of the things I hear when I go through life.
Tom: So as a follow-up question, what's something you think most people aren't paying attention to now but should be?
Jim: Oh well, there are many things. I would start with the debt in the United States government. You might say "oh, they're paying attention", I would say balderdash. You know, my entire life I've heard congress talk about deficit spending, bemoan deficit spending, and talk about the debt. Back in the 1980s there was something called the Grace Commission, which was specially commissioned to study what to do about the deficit and the debt. And it passed laws, congress passed several laws since then, saying there will be no more deficit spending, or there will be no more debt, there will be no more, this will change, blah blah blah. And then they turn around and they ignore the laws. This has been going on for a long time. You might say people are paying attention, I would say that's claptrap, they're just talking, they have no intention of doing anything about it, and even if they "do something", what they do is say "ok, instead of having increased spending, we'll have less increase, we'll still increase, it'll just be less." I mean, no, nobody's paying attention to it.
Tom: I think some people are aware of it, but it gets back to what I was saying about a systemic problem with the political system. Since pain later is easier than pain now, a lot of people on both sides kick the can down the road... they know there will be big problems but they don't want to lose political power now and they don't care what happens once they're out of office.
Jim: Well, I call that not paying attention. You say they're paying attention, I guess you're saying they're liars, not fools. Either way, people are not paying real attention to the biggest problems facing the world, not just America, and of course all of that deficit spending has led to money printing worldwide, and nobody's paying attention to that either. Now it's the accepted conventional wisdom that money printing is a good thing and only nuts like me say there's something wrong with debasing your currency.
Tom: Well, I'm definitely on your side with that, and as a long term investor I do worry that high inflation is on the way, and I don't know what to do to minimize the pain of it when it comes. I like to hold some cash as dry powder for when the market dips, but I know that its value is slowly falling to zero while I hold it. Do you have any recommendations for investors who think high inflation is coming in the U.S. and the rest of the world?
Jim: Well, nobody should invest in anything that they themselves don't understand. So if I sat here and said you should do x, y, z, and people don't have a clue what I'm talking about, they should probably ignore what I say or even what you say. Nobody should invest in something that they don't understand. If you know nothing about gold except that it's supposedly valuable, you shouldn't buy it, or invest in anything you don't know about. But once you know a lot about something, you will probably figure out some ways to protect yourself. I mean if you have your own business, like you, usually the best thing to invest in is your own business, because you know more about that than anything else. I have various ways that I'm trying to protect myself, but even if I told you I'm doing x, I might change my mind tomorrow afternoon, and then you would be stuck doing x because I said it. I'm not going to call you and tell you I changed my mind on that position. So people really need to invest in only what they themselves know a lot about.
Tom: You've said that the U.S. has too many lawyers and MBAs, and that the financial sector also isn't the best place to be starting a career now. What advice would you give to a student about what field to pursue?
Jim: Again, everybody, especially students, should pursue what they love, their own passion. Don't do what other people suggest. You know, back in 1958, America produced 5,000 MBAs per year; nobody else produced any. Last year we produced 200,000, and the rest of the world produced tens of thousands more. We have a glut, we have a lot more MBAs than we used to, there's a huge amount of competition in that field, in finance. And nearly all MBAs these days study finance. In the old days some of them studied manufacturing, or marketing, or accounting, or other things. Now it's nearly all finance. This is at a time when there's massive debt and leverage in the financial community. You know, back in the 60s and 70s there was very low leverage in the financial community, many investment banks were partnerships, partners weren't about to go and risk their entire fortunes with leverage. And of course now you have governments around the world antagonistic to finance, passing laws and regulations all the time, trying to come down hard on financial types. Finance, which was a backwater and pretty much ignored by everybody including students, has now become, in the 80s, 90s, and the last 10 or 15 years, wildly hot and popular. That's why I'm saying this is going to change. Throughout history we've had long periods where the financial types were the masters of the universe, followed by long periods when the people who produced real goods were. Well, that's changing now, going back to the old ways. We have more people in America studying public relations than studying agriculture. More people study physical education than study mining engineering. So how much more do you need to know? 10,000 people studied agriculture last year while 200,000 got MBAs.
Tom: And with such vast amounts of money being made in finance by the top couple percent, a lot of the country's best and brightest minds are going into it, I sometimes think their talents are being underutilized by the system, when they could be put to more productive ends, producing real goods.
Jim: There's nothing wrong with finance if you love it and you're passionate about it. And we do need financial types. But do we need a huge glut of them? Probably not. That was never very smart. But I happen to love finance and fortunately I went there when nobody else was going there. I would hope I'd be smart enough to find something I love where everybody else was not piling in.
Tom: So do you think one of the reasons you've been so successful is because it was a passion for you? I like to study successful people and try to reverse engineer their success... look at people who have accomplished what I want to accomplish and examine how they did it. Could others benefit by emulating your approach, or does everyone have to find their own path?
Jim: Everybody's got to find their own way. Listening to me, maybe it's fun, maybe it's boring, who knows, you're not going to succeed until you find your own way. I mean if you're a musician you've got to find your own sound, your own way. Great musicians through history were the people who had their own madness, and were proud of their madness, especially if it was not what everybody else is doing. Well, the same is true of art, literature, politics, finance... especially finance. Yeah, you can copy other people, and many people do, that's why everybody invests in the same thing, and that's why it winds up being a bad investment. No, you've got to figure out your own way, no matter how absurd your way may sound, especially if your own way sounds absurd to others, you should pursue it even harder. You can learn from other people, but don't try to be like Joe or Sally, try to be like yourself.
Tom: Even a better word than passion might be authenticity. When I was reading your latest book, Street Smarts, it struck me that your life has been guided by authenticity. You don't just talk about a life of adventure, you quit your job when you were young and circumnavigated the globe on a motorcycle. You don't just complain about the U.S. education system, you moved to another country with a better system to give your kids the best opportunities. A lot of people talk about quitting their jobs and living a life of adventure, and a lot of people complain about something but then never do anything about it. Is there something different about you that enabled you to live more authentically than other people who are held back from doing the things they know will make their lives better?
Jim: Yes, that's very accurate and insightful of you. How many people have you heard of, who've seen something happen and say, "well I knew that all along"? Well, if they knew that all along, why didn't they do something, why didn't they act? I guess part of my situation is, like when we were talking about the markets before, when I see things which I consider absurd, then I react, I invest, whether there's something that I buy because it's cheap, I see a change coming, or there's a bubble and I sell it short. I guess for whatever reason, since I was young, I have realized that you should do something when you see something strange. Now, do I always do it? No. I mean, I saw in the 1980s, China was going to be a spectacular success. Did I move to China? No. I mean, I just talked about it, wrote about it, broadcast about it. So I'm sometimes guilty of that. I'm in Asia now, I'm acting now, but I don't always act when I should or as I should. But very few people do. You know, when I moved to Singapore in 2007, I can't tell you how many smart, educated, knowledgeable, successful people said, "Are you nuts? Why are you moving to China?" Well of course Singapore is not China, it just shows you the extent of the lack of understanding and knowledge. But also they just couldn't comprehend why anybody would pack up and leave a great life in New York to move to a foreign country. Most people, for whatever reason, they listen to other people, they get into their groove, and they just cannot change. Look, I make plenty of mistakes. You can ask me in fifty years if I did the right thing, bringing my children to Asia. But, when I see something, I eventually act.
Tom: It's probably also easier to be a contrarian investor when you have inner authenticity, an internal compass, rather than having a lemming mentality.
Jim: Well, I try to avoid a lemming mentality. Part of the way I guess I do that is I don't really sit around chit-chatting with a lot of people, I don't speak to the financial community, I don't talk to broker pals, I don't talk to anybody, I sort of find my own things. And so I'm usually not aware of what the conventional wisdom is, unless I see it in the market. If I see something skyrocketing, going through the roof, then I say, well, what's going on there, then I'll find out whatever the absurdity is. But we don't have a TV in our house. So I sort of wander along, following my own style, my own life, rather than (I hope) getting swept away in whatever everyone else is thinking and doing.
Tom: I also wanted to ask about your passion for travel. You've been to many places that most people never go to. Do you have any recommendations for destinations that people should definitely visit at least once in their lives?
Jim: Well, it partly depends on what you yourself love. If you love nature, I would urge you to cross the Sahara Desert, or go down to parts of South America. If you love man-made objects, everybody should see the Taj Mahal, most have only seen pictures of the Taj Mahal. I've been there a few times, and every time I walk in I'm stunned at how magnificent it is. We should not allow people to take pictures of the Taj Mahal because they cannot do justice to how beautiful and how exciting it is. It's like the Terra Cotta Warriors out in Xi'an. Now, I've seen pictures of it a thousand times, but none of those pictures can do any justice to the shock of when you walk in there, you say "oh my gosh, how could this be?" It really depends on what you're interested in. Everybody should see the Grand Canyon. It's stunning, magnificent. Iguazu Falls in South America is a magnificent waterfall. Or Victoria, the one in Zimbabwe... fabulous waterfalls. Depends on what you're interested in more than anything else. If you can only visit one country in your life, I would urge you, Tom, to go to India. It's got a combination of man-made and natural sites like no other country in the world, it's got a breadth and depth of culture like no other country in the world. The languages, the traditions, the food. I mean it's a constant sensory feast walking down the street, driving down the street. It's an astonishing place to visit. So if you go to one country, I would urge you to go to India.
Tom: I've never been to India but it's been on my list. After that endorsement I think I need to move it closer to the top of my list.
Jim: India's one of the places that you could spend a lifetime looking around. If you do go, try to spend a little extra time, because it is a huge interesting and exciting place to visit. Now, I wouldn't invest there, but it's a great place to visit.
Tom: Another one of your interests is writing, you've written many books and you're clearly passionate about sharing your ideas with the world. How did you decide to become an author, and given your diverse interests and experiences, how do you choose what to write about?
Jim: Well, I didn't decide to become an author, I sort of stumbled into it. I went around the world, and that led to an accidental magazine article, which led to a book. Then I went around the world again. It never occurred to me after the first trip that anybody would care. I did that book, people seemed to be interested. I went around the world again, not because of anything except I wanted to see the world again, and I wanted to see it in a different way, so there's a book about that, because I thought people might be interested, and I wanted to write it down for myself as much as anything else. And then one thing led to another, my publisher said "oh gosh, you're always talking about commodities on TV, why don't you write it down?" And I said no, but then he said we looked and there are virtually no books about commodities, so I said ok. The book about China, the same way. The book about kids, the same way... when I had them, I was always thinking of things I wanted to make sure my kids understood. I started writing them down and the next thing I knew I had a book, which I hope someday my children will read when they're old enough to understand it.
Tom: That book was A Gift to My Children?
Jim: Yes. It's much better for adults or young people than it is for children. And then this book, Street Smarts, my publisher suggested I pull it all together. You know, I made many mistakes, had a few successes, put it all together, and do it in my own way, which is essentially telling stories. It's amazing how many people have written to me saying this is my best book. I didn't think about it that way. But many of them said they just loved the stories. I guess I'm a better storyteller and so I made my points by telling stories. All my books are essentially telling stories, but this one especially. It's a compilation of lessons explained through storytelling.
Tom: Street Smarts is the first book of yours that I've read, I had always paid attention to what you said on media appearances but I hadn't read any of your books, but I'll definitely be checking out the others now. I'm also interested in A Gift to My Children. I know you became a father later in life than most, which you talk about in that book. What's your favorite thing about being a parent, and what's the most surprising thing?
Jim: Well, I will say to you, I was very much against parenthood, I was never going to do anything so foolish as to have a child, I felt sorry for all of my friends who had children, and I found that I was 100% absolutely incorrect. I was totally wrong about children. In fact, anybody hearing this who hasn't done it, I urge them to get on with it, children are so much fun. Take a day off... well, don't take a day off these days, these are tough times, but go home for lunch. I'm really glad I didn't miss it. I never would've known, no matter how much people told me about children, I thought they were nuts, confused, I mean I didn't really understand what they were saying. So all I can tell you is be sure you don't miss it, because there's nothing you'll ever do that's as much fun and exciting as having kids. It makes me happy. I mean, these little girls make me cry almost every day, cry out of pure ecstasy and joy, watching them. I've cried more since they came along than I did my whole life, crying out of joy.
Tom: Wow. So it's like a trip to India every day?
Jim: Better. Better. To see them grow and develop a little every day, it's very exciting.
Tom: Also on the subject of parenting, other affluent investors like Warren Buffett have spoken about the challenge of not allowing money to spoil their kids, "giving them enough so that they can do anything but not so much that they can do nothing." Do you have a plan for how you'll instill in your daughters a healthy attitude toward money?
Jim: Well I, like many other people, including Warren, have a problem with how to do that. I don't know is the main answer, I've never had a child before. I've worried since day one about spoiling my children. Unfortunately, I know they're spoiled to some extent, just the nature of being around. So it's different. I don't have an answer yet. I try to teach them how difficult it is to get money, that money is hard to get and you have to work for it, you have to save it and invest it. I don't know if I'm successful or not. I don't want them to be spoiled but... well, here in Singapore, many people have help. I was speaking with my little girl the other day, she's four and three quarters, and I was telling her about when I was a little boy and we'd go fishing, we would catch fish, and we'd take them home and clean them, and give them to my mother to cook. My little girl looked up in amazement and said, without thinking, "What, they didn't have servants?" What are you talking about, didn't have servants? But that was her first reaction -- what do you mean, you cleaned the fish yourself and then gave it to your mother to cook? That to her at her age is incomprehensible. To me at that age it was incomprehensible that anybody would do anything else, except clean the fish and cook them. And I could give you many other stories. We're trying not to spoil them, but as I said, just by being around they're somewhat spoiled.
Tom: Had one final question for you that I like to ask everyone: What would you like to be remembered for?
Jim: My children. There's nobody I'd rather spend time with, or do things with, than my children. My girls are my best investment, my only investment at this stage in my life are these two little girls. So you can ask me in 50 or 100 years how I did, that's what I put my effort, time, energy in, these two little girls. So let's come back in 50 years and talk about whether I did a decent job or not.
Tom: Great answer. It's been good talking with you, thanks for taking the time to chat.
Jim: Thank you. I'm delighted you read my book, I hope you'll go and read the others too.
Tom: Definitely will. Loved Street Smarts, and recommend it to my readers.
Jim: Thank you very much, Tom.
Photo from Wikipedia.
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