The Rise and Fall of Nations

by Ruchir Sharma

I was tempted to read this book after someone recommended it and I read a positive review by The Economist. It’s very new, and I learned the author is the head of the Emerging Markets Equity team at Morgan Stanley, so I had good expectations. However, I’m sorry for reading it.

First of all, the book is not intended for you unless you are a portfolio manager of assets. Its focus is not for the general audience. Mr. Sharma tries to explain the rise and fall of nations in terms of which countries you can make money of by investing. He does not lend insights in what economic policies make sense, or explain why countries have an economic situation that is promising. He just shares rules, not backed up by data. The main reason we should believe him is his success.

This is amplified by my second major annoyance with the book, that Mr. Sharma is constantly showing off his business-class life to prove his credentials. Whether he is gaining his insights from going on safari every year, or from eating at all the three-star restaurants in Lima, the reader is meant to be impressed by the lifestyle, and take his word more seriously as a consequence.

Like mentioned earlier, often Mr. Sharma does not back up the rules he makes up with data or with insights. For instance, he claims China will not perform well because no country has experienced such a long period of building up debt without suffering in terms of growth. Of course, China’s debt is a problem to the country, but there’s no secret about that. For a long time, China has made the choice to continue investing in learning new technologies independent of outside economic shocks (‘just because it rains, school is not out’, to paraphrase Joe Studwell’s How Asia Works). Sharma does not offer insights into whether this was a good decision made by the Chinese government, nor does he explain if investors have realized and marketed Chinese debt problems already.

Another example is inequality. Mr. Sharma is seemingly oblivious to the fact that inequality has been rising since the seventies in most OECD countries. By quoting Larry Summers, he also attacks Thomas Piketty for not being able to explain the high degree of churn among billionaires. His distinction between good and bad billionaires is highly subjective, incomplete, leaves out the discussion of the Koch brothers, and seems to be more useful for the dramatic effect of the book than to understand the rise and fall of nations. Because inequality is something I know a little bit about, the discussion of inequality made me particularly hesitant to accept the rest of the book as gospel.

Concluding, I do not recommend reading this book. If you’d like to learn about inequality, I recommend Atkinson’s Inequality or Piketty’s Capital. If you’d like to learn about development in Asia, read another book, I really liked Studwell’s How Asia Works. If you’d like to know more about investment management, I would take another path.