This article explains how absolute poverty can be reduced and how South Korea went about moving from a poor to a relatively rich nation.
In 1953, South Korea emerged from the Korean War desperately poor. It was almost entirely agrarian, and whatever infrastructure the Japanese had built during their occupation between 1910 and 1945 had been destroyed. In 1960 GDP per capita in South Korea was only around $1,200, lower than in Bangladesh, Nigeria or Bolivia, and about 6% of the GDP per capita in the United States.2
Shortly thereafter, everything started to change. In 1968 the growth rate of GDP per capita in South Korea topped 10%. Throughout the 1970s, per capita GDP grew nearly 9% each year on average, slowing only slightly through the 1980s and 1990s. By 1995, South Korean GDP per capita had eclipsed Portugal’s. By 2008, it was ahead of New Zealand’s and just behind Spain’s. In 2020, GDP per capita in South Korea was nearly equal to that in the U.K. Not only is South Korea no longer developing; in many areas, it leads among developed nations.
The second theme is about generalists v specialists. This excellent article talks about how this can be extended to the business and investment worlds.
There are pros and cons to being specialist and generalist organisms. Specialists have more clearly defined niches and encounter less competition from other species. But when environmental conditions change, they can struggle to survive if they don’t adapt quickly.
Generalists have more competition from other species and therefore less resources to source. Yet, they are more adaptable to changes in the environment than specialists.
Most equity funds are generalists. They trade the whole, or large parts, of the market. For instance, if they take a dim view of banks, they can switch into commodities or industrials.
All these funds are highly adaptable. But they compete against many other funds and ETFs which are trading the same stocks.
Then there are specialist investors. Think of micro-cap funds, arbitrage funds, specialist property funds, and a host of others. These investors focus on a small segment of the market, where the competition is less crowded. They hope that gives them a sustainable edge.
Specialised investing can be difficult. Consider value funds since the GFC. Value focuses on buying stocks cheaply. This style of investing has been out of vogue for 15 years, while so-called growth investing has thrived. It’s been almost impossible for value funds to keep up with their benchmarks and many have shut down because of this.
Thought of the Week
More frequently you look at the price of something, more frequently you start to second guess why you own it. So frequent checking of the portfolio can be dangerous to long term compounding.
~ Anthony Deden
Video of the Week
The latest talk from Prof Bakshi and an excellent one. It is slightly lengthy but definitely worth the time.
Also, if you have not read the vantage point article that Prof Bakshi wrote now more than a decade back, then you should definitely do so.