Pareto Economics CEO Klisman Murati discusses future finance in asset management with FM Magazine, and explains how globalisation is shaping our daily lives.
You talk about the ‘wealth gap’ – do you have hope for a more equitable future?
“I think I do, but it would depend on the markers we use to compare the wealth disparity between the poorest country and the richest country. I think these differences are far too wide. The aim should be to make Somalia, for example, at the same level as Uzbekistan or the same level as France, or to compare countries that are very different in terms of their demographics and sense of power.
“If you were to do that, you would need to look inside the country and answer why the capital is typically the most vibrant and wealthy part of the country as opposed to the outskirts and the villages. There’s a natural distribution that runs across the wealth gap, and the wealthier an area becomes, the more people move there, and that compounds over time.
“That happens not only with the wealth of nations but also with the rise in wealth of companies and cities, how they grow, and why one part of the country is growing more than the other. There are specific fundamentals at play. So, you shouldn’t try to level the playing field by saying that this country should be at the same level as that country. Instead, I believe you should look at how the country has developed throughout history and raise living standards based on that metric.
“The aim should be looking at where the country is and where it can get to by seeing what fundamentals are at play there and improving specific aspects of that nation. As opposed to saying, ‘we are trying to be like this other country over there.’ You may take lessons from that other country, but in terms of copying exactly what they did, if you had the same historical fundamentals, then you would have been there already – you don’t. Therefore, you shouldn’t aim to go where your fundamentals do not allow you to do so.”
How is globalisation shaping our daily lives?
“Look, globalisation, I think, is a term that many different people use to mean many different things. If we take the core of how we define globalisation, which is the transfer of knowledge, culture, processes, and various parts of the world, you can see it compounding over time exponentially. So, a dentist in Kiribati, a mother who’s raising kids in Tristan da Cunha, and let’s say a corporation in the United States is fundamentally going to be changed and challenged over the next 100 years, which is our outlook by globalisation, geopolitics, transformative technology, and societal change.
“It would depend on who’s asking that question because if I were to advise a government struggling with a specific issue, I could be much more specific in my analysis. In the same way, if I am advising an investment house in this particular development of globalisation and how supply chains, for example, are being changed and challenged, then I could give much more specific advice. But what is undeniable is that the next, I believe, 50 or so years are going to see more transformational change than the last 200 because we are compounding our efforts in these four areas: globalisation, geopolitics, technology, and social change throughout the world.
“People are trying to use technology and aspects of society to reach levels they see happening worldwide. This aim of trying to catch the leader will have many unintended consequences that we’ll see in the world, depending on who’s asking that question. So, for me to give a much more specific answer, but for a general audience, I would say look around. You look at, for example, your parents’ understanding and perception is of how to use technology, compared with how you’re using it and how your children will use it and what that means for your reach, if you’re a business, if you’re a corporation, if you’re a government or if you’re an activist.
“This is what’s changing the world fundamentally, and organisations, investors and governments are very much waiting to see what this change will bring. They may be on the back foot a lot of the time in reacting to it as opposed to being active leaders in it. Because it’s such a new dynamic for humanity, really. I’m not using that in a throwaway term, but it’s really changing humanity, the way that we’re understanding the world and the way in which we are participating in it wholesomely.”
How do you predict the world of finance and economics will evolve in the future?
“Well, financial players, I think, will change, meaning what we’ve seen in the West and the explosion of economic, human, and intellectual capital, which has been spurred by the West and other regions. We’re going to see financial players grow and develop in different financial districts because their centres of power are developing to the level in which they have enough income to participate in the global economy and financial system.
“This will cause the Pareto curve or distribution to be localised in different regions. Not every financial capital is going to be the most lucrative. We’re going to see, for example, in the West, we have New York, London, Switzerland, and Singapore and Hong Kong in Asia. But within these regions, too, we’re going to see the growth, I think, of wealth. We’re going to see more establishments of family offices across the world, especially in Asia, which will use their capital to invest in different projects around the globe.
“We’re going to see different financial vehicles emerge worldwide and at varying levels of assets under management. Not everyone will be a billion-pound or billion-dollar asset manager or more. There will be smaller and larger sums across the world, and they will participate much more in their local, regional, and global economies. So, developments that we see may be stored in certain parts of the world, I believe, over the long term as more wealth is developed in these regions than these local entrepreneurs.
“These local financiers are going to be looking more regionally for a return on investment as opposed to going to probably more established markets, which over time will change also. And this is where local development will happen more. So, as time passes, you need time for these things to develop. But, as compounding efforts continue, we would definitely see this, I believe, in the next 20 to 50 years or so.”
This interview with Klisman Murati was conducted by Jack Hayes.
