One book I just finished reading was Aerotropolis: The Way We'll Live Next. Authored by a great friend of mine, Greg Lindsay, the book explores the impacts of globalization and its effects on the development of cities and consequently, how all of us, as global travelers, will do business. For the last fifty years, we have lived our lives with airports on the peripheral of the city. New Yorkers like myself abhor and fear the commute to JFK or Laguardia on a busy weekday. In the future, Greg posits that city development will be flipped upside down and airports will become the beating heart of the city, rather than on the periphery.
The book argues that air travel will become increasingly more important in our daily lives. I agree 100%. As capital continues to flow more freely from one geography to the next, investors will rely more and more on "on-site" due diligence rather reading SEC filings or annual reports. Specifically, as emerging markets will most surely grow faster than the domestic economy, and the competition for investment dollars heightens, the best hedge funds and investors will be traveling across the globe, turning over every stone to find the best risk-adjusted returns for their clients. And because of this increased global travel (and investing is only a fraction of the pie), we have to reconsider the "traditional way" cities have evolved and embrace a new paradigm for the 21st century.
I highly, highly recommend "Aerotropolis". It is a fascinating read full of anecdotes and commentary that are eye-opening and will make you rethink the way we will do business throughout the rest of the century.
I wonder if air travel will become more important...it seems that the more technology advances, the less it becomes necessary to actually BE somewhere else. I don't know statistics or anything, but most people I know have slowed down on their travel because everything can be done over the Internet.
ReplyDeleteHunter,
ReplyDeleteI enjoy your blog quite a bit but I have to question your claim that because the best hedge funds will be doing on site due diligence the number of overall flights will increase.
Hedgefund guys represent what % of the population? Netjets might reap the rewards but as oil inevitably grinds upward the 'average joe', so heavily underwater already is not going to be flying anywhere.
Also, I might add, what makes you think that local investors arent going to be snapping up lucrative deals before any foreign hot shots even get on the spot? If you look at the travails of the private equity industry in China, and here I am talking about Carlyle and KKR's recent troubles with various local companies youll see that no amount of on sight due diligence will overcome the power of a local potentate.
Hunter, I have to agree with the other two commenters.
ReplyDelete1. Internet- and satellite-based mapping and videoconferencing is far more efficient than air travel.
2. It is well-known among behavioral finance researchers that investors become overly optimistic when they spend too much time with company executives, or are wowed by a shiny new factory or corporate headquarters. This is a form of "home bias" that leads investors to buy stocks of locally based companies, as though they know more about its valuation than a more neutral, distanced observer.
3. SEC Reg FD requires all relevant information to be disclosed in SEC filings. Acquiring material knowledge through the "mosaic theory" of non-material bits adding up to a tradeable investment thesis is likely to be more costly than the trading opportunity. Google translations and competing software will only get better over time, reducing the value of local language knowledge.