#182: The Ephemeral Economy: Navigating Global Finance
LISTEN AND SUBSCRIBE
Apple Podcasts | Google Play | Stitcher | Spotify
Welcome back to another episode of The Richer Geek Podcast! Today, we're switching things up a bit. While we usually focus on investments, this time we're diving into finance. Our guest is Emmanuel Daniel, an author, entrepreneur, and corporate strategist. As a global thought leader on the future of finance and its impact on business and society, Emmanuel is a member of the Forbes Business Council and was listed as a top 10 global influencer in the "FinTech Power50" in both 2021 and 2022. He is also the founder of the research publication and consulting house, TAB Global.
In this episode, we're discussing...
Transformation of Banking: The digitization of banking has drastically changed the industry, making transactions faster and more efficient.
Future of Finance: As industries become more digitized, the nature of assets and investments will continue to evolve, impacting how people view and manage wealth.
Global Economic Dynamics: The intertwined economic relationship between the US and China showcases the complexity of global trade and the significant impact of geopolitical decisions.
US Economic Strengths: The US excels in information handling and liquidity in capital markets, setting it apart from other economies.
Socialism vs. Capitalism: The US has largely rejected the socialist model, focusing on market-driven solutions, whereas other countries like Sweden and Norway provide examples of successful socialist policies.
Local Community Influence: In the US, the role of local communities is crucial in creating social safety nets, reflecting the nation's diverse approach to balancing market forces and social needs.
Resources from Emmanuel
LinkedIn | Emmanuel Daniel's website | The Great Transition
Resources from Mike and Nichole
+ Read the transcript
Mike Stohler Hey everybody, welcome back to another episode of The Richer Geek Podcast. We're going to take a little switching topics today. We're usually talking about investments. We're going to talk about finance today. We have Emmanuel Daniel. He's an author, entrepreneur and corporate strategist. He's a global thought leader in the future of finance and its impact on business and society. He's a member of Forbes Business Council, and was listed as a top 10 global influencer in the "FinTech Power50", and this was in 2021, and 2022. Emmanuel founded the research publication, consulting house. Is it T-A- B, or TAB Global, Emmanuel?
Emmanuel Daniel
It's TAB Global now. It started as the Asian Banker. I started life just creating a banking platform which gave me an insight into the banking industries of 18 countries out in Asia, and then now that we are out in the Middle East and Africa, so we shortened that to TAB and it's TAB Global now.
Mike Stohler TAB Global. So tell us a little bit. I mean, you've won all these awards. You're very well educated. Tell us a little bit about your background and how you became, kind of like this industry leader, this mentor in global finance, the platforms of especially like in Asia. So tell us a little bit about yourself.
Emmanuel Daniel
You know, Mike, I was looking at the other podcasts that you do, and the people you have on your podcast, a lot of them have to do with fixed assets. How do you increase the valuations of that? I entered the labor market as a kid, coming out of a lower middle income family that valued the professions, and so I wanted so much to be a lawyer. And then, long story short, when I did become a lawyer, that's exactly what I didn't want to become, and then I went on a journey, looking for something I can create on my own. And nothing in my family indicated that I would be a business owner of my own right. But the business that I chose, unlike a lot of the experts that you have on your podcast, had to do with information in the banking industry. And why did I choose the banking industry? Because, the way I say it today is it's a cathedral industry. Everyone's got something to do with banking from cradle to grave, regardless of which country you're in, and it pays the bills. In my case, if I started in something like government or something politically sensitive, I might have had problems in Asia, which is where I come from, just creating the banking platform enabled me to build a business that is truly global now.
Emmanuel Daniel
We do programs in Silicon Valley, in Seattle, in New York, and because it's information based, I'm held at the mercy of the Information Industry in a way that someone who builds a business around a fixed asset like property has a different dynamic to it. So it's fascinating. And then when I looked at what's changing the banking industry. I look back at the asset intensive industries that create wealth today, what I see is that the more you digitize that industry, the more ephemeral it becomes. It starts behaving like the information industry that I'm in, and that's how I ended up writing my book and doing work with corporations that need to think about how to deal with the rules of the information age as it comes into affecting assets and industries that different people come from.
Mike Stohler
It's very interesting. In the past you had paper money. What we're thinking may be Coinbase, but basically real money to something that you don't even see in the cryptocurrencies, in blockchains, gaming, or other technology. So it's almost like our, what do you think is the future? Is our society going more towards something non physical, to something that's just going to be out there?
Emmanuel Daniel
Mortgage industries. Some people may not think about it this way, but just think about this that as the mortgage industry becomes increasingly digitized, the way in which you look out for caveats on your mortgage that you're intending to put together, the way in which you complete the transaction, the way in which you deal with each other and so on. So a lot of technology is coming into play right now. It used to be that to complete a mortgage transaction would take you six months, and then it became three months, and then became two weeks. We are well heading into the phase where caveats and when documents are launched digitally. Today, it may well be that you can flip a property in two minutes. We're getting to that. And then when I look at things in finance that have become digitized, it has actually transformed entire institutions. What happened to Silicon Valley Bank was that the deposit industry became digitized. What it does to the bank is that you can have a bank run in an instant on the back of a tweet. Elon Musk tweets on a Tuesday morning, Wednesday morning, there's a ten billion bank run, and you didn't even see it. And that's coming to fixed assets, like mortgages and property, and then you start seeing differences in behavior. The next generation is going to treat property very differently from the mom and pops who would buy a property and sit on it for 30 years, and the reasons for which they would invest in a property will become increasingly ephemeral, and this will have an effect, an impact on property. And over a period of time, the next generation will not be viewing physical property any different from virtual property, things that they own on a gaming asset. For example, the kids today, they buy these little toys for hundreds of dollars. Just because they can, that's where you'll find the rules that will eventually creep into why and how, fast, how easily, people would say anybody would treat a physical property. And those were the thoughts that went to the back of my mind when I looked at the other podcasts that you had.
Emmanuel Daniel
And then I look at it from a global perspective, because I travel a lot, been to about, I think, 123 countries now. I see entire economies from the outside in, and I see that the US has this advantage in that it is a purveyor of transparent information at the capital market side, and that permeates the way in which the rest of society behaves. And no other country in the world has that level of transparency and liquidity on the market front that the US has, there we go. I'm looking at everything from fixed assets to an entire market. All of that has an effect on how societies behave. So that was the conversation you and I were having just before we started.
Mike Stohler
Yeah, taking that on another level, as far as the future of global finance navigating geopolitical challenges. Talk a little bit about here in the US. We look at Russia, we look at China's as these threats, or are they threats? How do we work together, the tariffs, all these things as we go through the geopolitical challenges of the world markets, trying to either go on their own or the dependency that we have on each other. So talk a little bit about, I know when your specialties are China, and China is kind of a big topic for us Americans. So what do you see out of China, and what they're trying to do with going more independent, and can they do that, and just how we all kind of tie together as far as global finance.
Emmanuel Daniel
The one thing that we can put our finger on in this conversation is the increasingly ephemeral nature of economies. The US used to be a manufacturing hub for the whole world, and now it simply isn't. And the reason is it both on the asset front as well as on the labor front, the US is becoming increasingly ephemeral. Ephemeral means that you don't take pride in producing physical goods, you take pride in services, you take pride in brands, you take pride in information. All of these are ephemeral assets. The US is no longer capable of being a manufacturing hub, and so that's why. The Inflation Reduction Act, for example, which is trying to bring the entire industries back. The horse on that one is bolted out already. I mean, it's not coming back. And then the US has to start thinking a lot about, what kind of an economy are we going to be? The more ephemeral we become.
Emmanuel Daniel
From the outside looking in, what I see the US is that it's become the most efficient economy in handling information. And on that front, no other economy comes close. And the ones which are like the US, transparent, high liquidity and all that, we will find that we will end up having the same problems as the US. And when you look at the top 10 companies on the US stock market, and compare that to the top 10 in other markets. In some markets, the top 10 industries or businesses are property. In other markets, trading companies in the US, they are technology companies that are, you know, adding increasing amounts of productivity to the economy, and when the market rewards companies like that, it then punishes companies that can't meet those productivity challenges. And that's where you see the effect on society. It ends up punishing parts of society that can't keep up with the productivity gains.
Emmanuel Daniel
And then you go out to Singapore, which is where I come from. And the top three industries in the Singapore market are banks and those are services. They are legislative services. They are licensed industries. They are intermediaries. And the US market doesn't have space for that kind of business anymore. The banks are way down the list in terms of being attractive. They are. Really interesting, because they are purveyors of the interest rate regime and all that. The thing is that the theme here is the increasing ephemeral nature of entire economies, and the US is a leader in that front. But because it's a leader, it pays a price, to be honest, because they spend a lot of time in China. We should part by understanding what's right about China. There's lots of things that are right about China. If you are in China right now, you'll find a quality of life that is unmatched, even in the US and how a socialist government, you know, managed to ace that is a story in itself.
Emmanuel Daniel
The problem with Americans looking at China is that we need to label it before we talk about it. You know, it's like you're a communist and therefore everything you do is wrong. When you do that, you don't get to understand the essence of what it's become as an economy. But it also grew because it absorbed the physical production capacity of the US. In a lot of ways, the US and China are forever intertwined. The reason why a lot of things are affordable in the US, despite high inflation, is because China has absorbed the cost of production and they've aced it. They are now the world's largest producer of almost everything. That's an achievement in itself. But where they can't match the US is, or they're continuing to learn, how do you create markets? How do you create transparency of information in order to make markets liquid, you know? And what's the role of the state in this and on that front, they're highly challenged, you know, relative to the US in creating capital and being able to fund that the idea of society that they have, it has been the US market since about 2001 which is when China became part of the WTO and plugged into the global economy to about 2014 it was the US capital market that funded entire states.
Emmanuel Daniel
If you take a company like Alibaba, for example, the state wasn't able to fund an Alibaba, and Alibaba grew from a small city called Hangzhou, it was the US investor that, was Goldman Sachs, for example, that gave it its valuation because they wrote this narrative that the future is in large countries. China is a large economy, and therefore industries can scale. When Alibaba was listed on the New York Stock Exchange, its valuation went up to about $800 billion at its highest point. What happens there is that that $800 billion comes back to Hangzhou and creates 100 companies, ten billion and 1,000 companies which $100 million and then you see the magic of the effect, or capital markets, of the US capital market, on a country like China.
Emmanuel Daniel
Now what's happening is the state wants to negate that development. The state has its funding, its own source of funding, and Alibaba has now fallen from 800 to below 200 million billion dollars. And when that happens, the cascading effect of capital flounders, and then you see joblessness on the streets and so on. In that regard, if we see the US and other major economies in the roles that they play relative to each other. You see where the US is, the frontier of the information revolution, frontier of the capital market revolution, and then exporting that globally. And then the rest of us get to pick and choose what we want to, you know, what we want to benefit from. When we start talking about these things in geopolitical terms, in other words, as if it's a competition between states, we miss the point, and we miss the narrative.
Emmanuel Daniel
We miss the mechanics by which these relationships are actually operating. And you see that in the number the trade figures who's buying from each other. When China doesn't want to buy wheat from the US, it goes out to Brazil and all of the other countries, and then it finds that, you know, they can't supply wheat at the lowest cost that the US does because of its high productivity in wheat production. And then it ends up buying us wheat through other markets anyway, which is what Europe is doing right now with oil. It's apparently now buying Russian oil from India, and the same thing the other way around, which is that China, despite exporting to all the rest of the world, China is the largest exporter to 140 countries around the world. So 140 countries around the world side, China is the single biggest trading partner, but they buy from China. But despite that, the US is China's number one exporting destination. If you take the US out of the economy, the Chinese economy will suffer. That's how it all holds together. And if you want to put our finger on the one thing that we need to track in terms of how the global economy holds together and the value of the relative of the in. Individual economies. It is the increasing digitization of assets, the increasing ephemeralization of the assets and the US is right there in the front, and it pays the price for that.
Mike Stohler
You know, for a lot of listeners out here, younger listeners. They want more of a socialistic world. Some of the older people, I don't want to separate older and younger, but another portion thinks that there still has to be capitalism in the world. It can't be all capitalistic, because then you just everything's running muck. You can't be all socialist, because then nothing ever gets done. As far as creativity, how do they kind of meld together? And because one needs the other and they can work together a little bit because over here, it's really divided on whether or not we need to be more socialistic, or do we need to stay capitalistic, or is there kind of an in between? You've been to all these countries in the world. What's your take on that whole thing?
Emmanuel Daniel
Yeah, so the one thing there is that the US has psychologically rejected the idea of a socialist state. The Socialist solution is right there, sitting there. For anyone who wants to listen, you just take a flight to Sweden or to Norway. You'll see how socialism works. And the US is the one (Group of Seven) G7 country that doesn't have a social safety net. Everyone is on its own. You create your own 401(k) account, and you look after yourself. In most countries, by the time you get old, you get health care for free, and social infrastructure, like education is free right up to university. In Germany, I have employees, German employees, who were studying right up to the end. They were 42 years old, and the state sponsors all of that, and they saw the US has categorically rejected that as an economy, as a people. It has categorically rejected the idea of a social safety net.
Emmanuel Daniel Then the question is, how does the local community create those social safety nets that approximate what needs to be done, and that's why the US is so dependent on the social fiber, and that's so different in different parts of the country. So having rejected that, the US is on a journey to find that equilibrium between what the market does to the economy and what the local community needs to do as the world changes. If you're American, you're always not happy about the local community. But whenever I go to the US and I stay with friends in Upstate New York, in Syracuse, in Seattle and different parts of the country, in San Diego, each of these communities are configured differently in terms of the local community. A lot depends on the local community versus the state and the nation. And that's the dynamics at play in the US, if you want alternatives, you just go to Canada and the cost of your medicine comes down,
Mike Stohler
Yeah.
Emmanuel Daniel
And why is that? That's because there's this collusion between the pharmaceuticals and insurance companies in the US. And by the way, that formula is being exported to the rest of the world. And in the places that I live in, Singapore, for example, at the moment, you have insurance. Your health care costs actually shoot up, it shoots up, and then it depends on the state to ameliorate the cost of healthcare. Then the question is, how much do you want a state to interfere in markets in order to create an equitable society? Again, there we had this conversation. Different states in the US handle it differently. And coming from Singapore, a state like Florida, and what is doing, I say, "Well, that's what we do anyway. So what's the problem, guys?”, as we talk.
Emmanuel Daniel
The funny thing is, the people from the liberal states moving to a state like Texas or Florida and then demanding that it becomes as liberal as where they came from, and that's where some of the rhetoric is, right? So I think rhetoric that can go on forever, the essence, the trends, and putting your finger on the real issue, and then backing how that's evolving, that's what we need to be dealing with. And I honestly think that I still meet people, immigrants in the US, who become insanely rich and they're happy, I know, and they are the most devastated countries in the world, and within one generation, they run businesses that are insanely successful. And the reason for that is not just the fact that the US has got has opportunity, but it's got large pockets of inefficiencies that can be still cultivated, and the guys will figure it out that there's still a lot of wealth to be created from that, in the same way that there are lots of industries in the US where, because of productivity gains, you see mass layoffs, you see a lot of evil and so on. It depends on which side of the equation you're playing.
Mike Stohler
Yeah and that's true. That's what makes America so great. And the viewpoint of an American is the fact that you can be an immigrant, come over here with dirt in your shoes, and then be a multimillionaire within a couple years. That's what we call the American dream, and that's what sets us aside from the other countries that say I do business in Spain, and no one in Spain that I've ever met wants to be rich because they get taxed more. They actually will make less. They just want to say, "Hey, look, as long as you make me happy, I'll do anything you want, but don't pay me anymore. Just pay me enough, because I get all the other stuff." It's a different way of thinking. Before we have to go, we're approaching very quickly with our time. Let's talk a little bit about 'The Great Transition', your book and just the personalization of finances here. I'm sure it's on Amazon and all the other places that you buy. Tell us a little bit about the book.
Emmanuel Daniel
Yeah, the one thing that I am exploring in the book, and we can explore in this conversation, and all of society is exploring, is the increasing personalization of society as a whole. In fact, when I was writing the book, as I came to the last pages, that's the conclusion I said, which I made, which was that I see the personalization of finance. And what is the personalization of finance because of technology and because of the way in which markets are evolving, the individual has greater control of his assets, control over the information on its assets, control over how he interacts with others, and that has an effect on in the intermediation business, which is what finance area is how institutions need to be to hold together, to continue being a player. Because just through the disintermediation of finance, in other words, you don't need a bank to send money to each other.
To put it simply, you don't need a bank for a lot of things. So then the bank needs to think about its role in intermediation. The technologies and the markets don't reward intermediation anymore, not in the way that it used to. What's true in finance is now becoming increasingly true in society as a whole. And what we are going through as economies, as global economies, is that the individual is being empowered. So then, how does an economy hold together? How does a society hold together? What kind of rules do you need to pull societies together? Because the individual has more information on his assets, on his ability to interact with each other. And you know something, those issues affect people in the US as much as it affects anyone in China and institutions need to figure out how they want to play. And so in this conversation, the increasing ephemeral nature of assets and the empowerment of the individual is transforming how we become rich, how we hold together as a society. That's what my book talks about. And the more digitized an asset is, the easier it becomes to transact them, and then the rules by which we transact them will change.
Now, a lot of what I'm saying looks like far fetched and into the future, but if you look at what happened to Silicon Valley Bank, that's going to happen to everything else that we have in society, and when it happens so quickly, then we need to put our finger on why that change came about. Those are the things that I'm dealing with. And then I help corporations try and figure out how they want to play and how they want to evolve. And even as we speak, regulators are putting in place new rules. The tokenization of deposits is well on its way into the US. Right now, the Fed is talking about it, the Treasury is talking about it, and it will have an impact on both the banking industry as well as how individuals look for opportunities and global geopolitics as well. So the funny thing is that I thought I was writing a book on the future of finance, and then I, by the time I ended it, I said, I know what all of society is transforming this way.
Mike Stohler
It's amazing. Emmanuel, if someone's listening today on this podcast and they want to learn more. Where can they find you? Are you on LinkedIn? Are you on any of the socials, they want to get in touch with you? How can our listeners find you?
Emmanuel Daniel
You know, Mike, I recently started doing podcast videos. Sorry, the word podcast is wrong, but just videos talking about some of the things I'm talking about from a historical and economic perspective, and I have a YouTube channel, @emmanueldanielauthor
. Even if you didn't know that, if you went to my blog page, emmanueldaniel.com, it'll take you to everything else. That's where my ideas, as they evolve, come on stream. I'm just always curious when I'm on a podcast with someone like you, where your listeners are mostly hard-nosed investors, whether something that I'm saying is far fetched, and I'll say this, that the digitization of assets is transforming how you need to look at how you create wealth and hold your asset, the valuations on your assets going forward.
Mike Stohler
It's amazing. I'm now seeing hotel investments, syndications that are all tokenized, and it's just like, "Oh, I don't know." But it's going down that road where there won't be any cash, it's all going to be tokenized. It's just amazing.
Emmanuel Daniel
And tokenize is transforming asset holders everywhere, small towns in Thailand and all that. So, yeah, you got it.
Mike Stohler
It's crazy. Emmanuel, it's been a pleasure. Ladies and gentlemen, this is a break from our normal type of podcast. More informative. It's about global finance, where it's going. And I hope you learned something with Emmanuel. Pick up his book, The Great Transition, by Emmanuel Daniel.
Mike Stohler
Emmanuel, it's been a pleasure. Thank you for coming on the podcast.
Emmanuel Daniel
Mike, thank you very much for having me on.
The information, statements, comments, views, and opinions (collectively, “Information”) provided in this podcast are not intended to be and should not be construed as financial, economic, legal, accounting, tax or other advice. For our full disclosure, click here.
ABOUT EMMANUEL DANIEL
Emmanuel Daniel is an author, entrepreneur, and corporate strategist renowned for his insights into the future of finance. He is a member of the Forbes Business Council and was recognized as a top 10 global influencer in the “FinTech Power50” list for 2021 and 2022. Emmanuel founded TAB Global, a research and consulting house, in 1996. He has extensive experience working with leaders in banking and finance through platforms like The Asian Banker and Wealth and Society. His book, “The Great Transition – the personalization of finance is here,” published in September 2022, explores the future of the banking industry and disruptive technologies in finance.