It's the worst geopolitical landscape of most of our lifetimes - What investors need to know
Ian Bremmer, founder and president of the Eurasia Group, lays out the biggest geopolitical concerns that could impact markets in 2024.
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00:00 Your risk lists are never sunny,
00:03 but your call for 2024,
00:05 you call it the Voldemort of years politically.
00:07 Why is this the year that must not be named?
00:11 Well, I mean, first of all,
00:13 because we are here in the United States
00:16 and facing an incredibly dysfunctional,
00:21 polarizing election period.
00:23 And it's happening at a time
00:25 that the rest of the world is not stable.
00:28 I mean, it's one thing if you're flying a plane
00:31 at 40,000 feet and it's sunny out
00:33 and you hand the controls to somebody
00:36 you're not really sure about, probably gonna be okay.
00:39 You're trying to land that plane when it's a hurricane
00:41 and you can't see the landing strip, might crash the plane.
00:45 So that is a very, very serious political issue
00:50 that I think is causing a level of distress, anxiety,
00:55 all the way to panic, depending on who you're talking to.
00:57 But beyond that, of course,
00:58 we have a couple of other big wars happening in the world.
01:02 One in the Middle East between Israel and Hamas,
01:06 that you're not gonna be able to contain.
01:08 And one in Europe between Russia and Ukraine
01:12 that is not heading well,
01:14 certainly not from the perspective of the US and its allies.
01:16 So you put those three things together,
01:18 even if everything else was perfectly sunny,
01:21 that by far is the worst geopolitical environment
01:25 of our lifetimes.
01:26 We've never seen that, right?
01:27 I mean, you'd have to go back to like World War II
01:30 before you had that level of geopolitical risk
01:33 from that many different corners of the planet.
01:36 There are good things that are happening.
01:37 That's not what you just asked me about,
01:39 but from a risk perspective,
01:41 those are the things we're most worried about.
01:43 And what kind of president does the US need
01:46 given the current global instability?
01:50 Well, I mean, not one that's running.
01:52 So not one that we're gonna get.
01:55 And you see the level of general dissatisfaction
02:00 with both candidates in the United States right now.
02:03 But the problem is deeper than just a matter of candidates.
02:06 I mean, the fact is that there's really no one
02:08 that could be running
02:09 that would get a strong majority of the country.
02:12 And the kind of leader you need
02:14 is someone that actually would bring the country together.
02:17 Now, Biden has wanted to bring the country together
02:20 for the last three years.
02:21 He's not particularly polarizing as a person,
02:25 as a politician.
02:27 And so why is it that we are in the fix we presently are?
02:32 And that says more about the nature of the country
02:34 and the nature of the challenge
02:36 than it does about the two people that are running.
02:38 In other words, I think that the problem here,
02:41 Trump clearly is a clear and present danger
02:45 in terms of his ability to blow things up
02:48 if he becomes president in 2025
02:51 and his focus on vindictiveness and the rest.
02:54 But the real challenge
02:56 is that the world's most powerful country
02:58 cannot have a free and fair election seen as legitimate
03:04 by all of its population.
03:06 Can't actually host something that's completely foundational
03:10 to the functioning of a proper democracy.
03:13 That is a very serious problem.
03:15 There are a lot of countries having elections
03:16 in the world this year.
03:18 You've got India, you've got the European Union,
03:20 you've got Mexico, you've got Indonesia.
03:22 None of those countries have that problem.
03:24 The most powerful one does.
03:26 That's what's driving the rest.
03:28 - When was the last time the US was in danger
03:31 of not being able to have a free and fair election?
03:34 - 1870s.
03:35 I mean, sort of really would have been
03:38 in the Reconstruction period
03:40 when you were essentially close to a constitutional crisis.
03:45 That I would argue would be the last time we've seen that.
03:48 Nothing remotely like that in our lifetime.
03:50 Certainly not 2020.
03:52 I mean, in 2020, the sitting president
03:55 did everything he could to subvert the outcome,
03:58 but it was not a coup.
04:00 Could not be a coup because the judiciary opposed it,
04:04 the military opposed it, the police opposed it.
04:07 There was no way to make it happen.
04:09 Where in 2024, you have a situation
04:13 where the stakes are actually much higher
04:16 for both of the people that are running.
04:18 If Trump loses, he's going to jail.
04:21 He knows this.
04:22 And so he has to do absolutely everything possible
04:26 to ensure that that does not pass.
04:28 And if that means efforts to undermine
04:31 and subvert the actual election itself,
04:33 certainly those are efforts
04:34 that he and his supporters would take.
04:37 Secondly, if Biden loses,
04:40 there's a significant expectation
04:42 that he and his closest advisors
04:45 would face serious legal challenges,
04:48 maybe jail themselves, investigations.
04:50 I mean, Trump will have to undo the indictments
04:55 and probably by election time,
04:56 the convictions that he's already faced.
04:59 And he's going to weaponize, politicize
05:02 the Department of Justice, the IRS,
05:05 and the FBI to go after his political adversaries.
05:11 In 2016, when Trump won, that was not a priority.
05:15 In 2024, it absolutely will be.
05:19 So it's not that Trump is particularly different
05:21 than he was the first time he was elected president,
05:23 but the geopolitical environment is radically worse.
05:27 And the domestic prioritization for the president
05:30 is very, very different and it's more challenging.
05:33 Moving on to looking at investors,
05:35 what do you think the biggest risk
05:36 for investors in 2024 is?
05:39 The biggest risk for investors is precisely
05:43 that level of uncertainty for the United States.
05:46 Now, the US economy is doing very well.
05:49 The dollar's very strong.
05:50 US technology, artificial intelligence dominates the world,
05:54 but your ability to rely on political certainty
05:59 and transparency in the United States domestically
06:04 between red and blue states is becoming a hell of a lot
06:06 harder in the political and electoral environment
06:10 that I just mentioned.
06:11 So you are potentially questioning whether or not
06:16 you can invest in the United States in a non-political way.
06:21 We've already seen some of that
06:24 with red states versus blue states on ESG and DEI,
06:28 but that is likely to become significantly
06:30 more challenging and costly.
06:32 But the biggest problems aren't in the United States,
06:35 but what happens as a consequence of that.
06:37 You've already seen that it looks increasingly unlikely
06:40 that the US is gonna be able to get its $61 billion
06:43 for Ukraine this year.
06:44 Big reason for that, Trump putting his finger on the scale
06:47 and saying, "I don't want it done."
06:49 The reason that he has an impact
06:50 is because he's gonna get the nomination,
06:53 and as he gets the nomination,
06:54 all of the Republicans will line up behind him.
06:57 It'll also be true in the way he talks about things
06:59 about the border.
07:01 That's also true in terms of his position
07:02 on the Middle East, going after the Iranians.
07:05 In other words, Trump's policies,
07:07 even if he doesn't become president,
07:09 will become the policies of the entire Republican Party.
07:12 As you see people like Tim Scott and Ron DeSantis,
07:15 and very soon Nikki Haley,
07:17 full-throatedly endorsing the former president,
07:20 and therefore all of the things that he supports,
07:24 and all of the legal jeopardy that he's presently in,
07:27 they're buying all of it.
07:29 And that means that's going to be the position
07:31 of the entire Republican Party
07:33 and the media that supports it,
07:35 and the money that's behind that election.
07:37 That is an incredibly dysfunctional
07:40 and destabilizing political year in the US.
07:43 Another one of your top risks
07:45 are high rates driven by inflation,
07:47 which not everybody is expecting,
07:49 which might make it more dangerous.
07:51 Can you talk a little bit about that,
07:52 and what can investors do?
07:54 It's a relatively low risk
07:57 because we're not talking about a recessionary environment.
08:00 We're talking about inflation being higher for longer
08:04 than the markets are presently pricing in.
08:06 There's an enormous expectation on the part of the markets
08:10 that interest rates are coming down dramatically.
08:13 The Fed's going to do a lot of lowering
08:15 over the course of 2024.
08:17 We think that that's too much.
08:19 We think it's going to be less than the markets expect.
08:22 And a big part of the reason for that
08:24 is the level of geopolitical uncertainty
08:26 and the implications for the markets.
08:29 The supply chain challenges when the Middle East war expands,
08:33 the challenges on the markets for energy, for example,
08:37 when Ukraine increasingly starts hitting
08:39 critical energy infrastructure in Russia
08:41 because there's no way for them to take land back,
08:43 but they're getting more desperate,
08:44 and they've got the drones and the missiles.
08:46 Those sorts of things, not to mention El Nino,
08:50 and yet again, the warmest year on record
08:53 with economic implications and insurance implications
08:56 as all of that climate change and high impact
09:00 weather stress events plays through
09:03 in countries around the world.
09:05 Those things are not priced in.
09:07 When you look at how much the markets expect
09:10 interest rates to come down,
09:12 that is a consequence, as a consequence,
09:15 a risk for the marketplace.
09:16 - And when the market expects interest rates to come down,
09:19 there's what the Fed should do
09:21 and what the Fed is going to do.
09:23 Do you think the Fed shouldn't cut rates
09:25 and also that they are not going to
09:27 as much as the market thinks?
09:28 - It's less about what I think they should do
09:30 because I'm not an economist, I'm a political scientist.
09:33 What I'm saying is that the geopolitical
09:35 and related risk environment of 2024
09:38 is a lot higher than the economists
09:40 and the markets are pricing it.
09:42 - Another one of your big top risks for 2024
09:46 is ungoverned AI, and you also have this
09:49 as one of your big three risks in your book
09:52 about the coming crises.
09:54 What's the biggest short-term risk for ungoverned AI?
09:57 - I'm a huge enthusiast when it comes for AI.
10:00 I believe that the level of productivity is extraordinary
10:04 and the technology is moving very fast.
10:06 You're going to see it used in every sector,
10:09 in every company, and therefore,
10:11 you're not going to have really powerful companies
10:14 and powerful individuals trying to stop it,
10:17 which is what usually happens
10:18 with the technological revolution.
10:19 You get, you know, post-carbon energy
10:21 and then all the coal and the oil people try to stop it,
10:24 try to lobby against it.
10:25 That's not happening in AI,
10:27 so it's going to actually lead to a much bigger upside
10:29 than people expect, much faster,
10:31 but technology is moving much faster
10:34 than the ability to govern it,
10:36 and that means that the negative externalities,
10:38 which one would expect from such a transformative technology
10:42 are going to happen very quickly
10:44 and they aren't going to be contained or constrained.
10:46 What kind of negative externalities?
10:48 Well, one obvious one is deep fakes
10:51 and artificial intelligence used for disinformation.
10:55 So, you know, in an election like the United States,
10:58 where so much is at stake, where people are so angry,
11:01 where there's so much chaos that could come,
11:03 we're moving from disinformation
11:05 to AI-driven disinformation,
11:07 that's a very significant disruptive risk.
11:10 Then there's also the question of what bad actors can do
11:12 to just blow things up.
11:14 So you use AI to code, it's very impressive.
11:16 Use AI to create malware, it's very dangerous and costly.
11:20 Use AI to create vaccines, we love that.
11:23 That actually got us out of COVID a lot faster
11:25 than we otherwise would have been.
11:27 Use AI to create new viruses and new diseases,
11:30 we don't like that so much.
11:32 And as you have these new incredible AI tools
11:35 that are rolling out that everyone has access to,
11:38 some of which are open source,
11:39 and they will be used not just for productive purposes,
11:42 but also by tinkerers and by bad actors,
11:45 this is the first year we're going to start to see
11:47 the negative impact of that more broadly.
11:50 - You talk in your wrists about America's confidence
11:52 in political and social institutions,
11:54 and it feels like this ungoverned AI
11:56 could also lead into that.
11:58 Can you talk a little bit about why it matters
12:00 that our confidence is so low,
12:02 and what we can do about that?
12:06 - Our confidence is not just low
12:09 in our government institutions,
12:10 it's low in the school system, in the media,
12:14 in the church, whatever church you're talking about.
12:17 I mean, the fact is that institutions,
12:20 which are how we become educated,
12:24 how we develop from children into adults
12:27 that act in a civic way to create a community,
12:31 to create a nation,
12:32 those institutions have been eroding,
12:34 they're getting weaker,
12:35 we don't believe in them as much as American citizens.
12:38 And that's a problem,
12:39 that means we don't know what our country stands for,
12:42 and we're more willing to believe things that aren't true.
12:45 We're more willing to become tribal
12:47 and polarized in our views.
12:48 We're more willing to turn on our fellow American citizens
12:51 as enemies, as others,
12:53 behaving in ways that really are deeply un-American,
12:57 and the kind of values that I think a lot of us
13:00 want to be able to share.
13:02 And, well, what do we need to do about it?
13:05 We need to invest in civic infrastructure.
13:08 We've invested so much in hard infrastructure, finally,
13:12 you know, we know our bridges are falling down,
13:14 so we finally do an infrastructure act,
13:16 and, you know, we try to make sure
13:17 that maybe we can make a cell actually work
13:20 the way it was supposed to,
13:21 and stop bridges in Minnesota from suddenly falling down.
13:25 We know that we ignored our semiconductor industry
13:28 for 20 years, it all went to Taiwan,
13:29 we're now building that again.
13:31 We know that we weren't focusing on transition energy,
13:33 we're now creating all these jobs in red states
13:36 and in blue states to move us,
13:38 not just from being the world's biggest oil and gas producer
13:41 but also the world's biggest renewable energy producer.
13:43 We know that we need to invest in infrastructure.
13:46 We're investing nothing in civic infrastructure.
13:49 We're not investing in the institutions
13:52 that create a strong community,
13:55 that allow us to engage with our fellow citizens
13:57 and not feel like nobody cares about us.
14:00 That has been the ugly stepchild
14:03 that nobody wants to talk about
14:05 or spend money on in the United States,
14:07 and as a consequence, a lot of Americans feel left behind,
14:11 angry and wanting to break things.
14:14 That's how you end up electing people
14:18 that are destroyers as opposed to builders.
14:20 - Number 10 on your top risk list
14:23 is the corporate culture wars,
14:25 and this is something we see in the news every day,
14:27 we are all talking about it in our own companies.
14:29 How should companies navigate this?
14:31 Is there any way to win?
14:33 - Companies do not want to have to deal with politics.
14:37 The more people like me are talking to companies,
14:39 the more unhappy they are.
14:41 They want globalization,
14:43 they want capital that can move everywhere.
14:46 They don't want to have to be different politically
14:48 in different constituencies.
14:50 They're getting used to having to do that
14:51 all over the world,
14:52 but they didn't think they had to do that
14:54 all over the United States,
14:55 and yet increasingly they do.
14:57 It's the battle against woke capitalism.
15:00 It's the battle against DEI.
15:02 It's some of your clients and some of your customers
15:06 in certain states want you to say one thing,
15:08 and it's black or it's white,
15:11 and then people in other states
15:13 want you to say exactly the opposite,
15:15 and they'll punish you.
15:16 It's Disney in red Florida and blue California
15:20 feeling like there's no win for them to be both,
15:24 to be able to serve both.
15:25 I mean, shouldn't Mickey be equally red and blue?
15:28 Does it really matter?
15:29 And the answer is yeah, it really does.
15:32 It's almost impossible to serve those constituents,
15:34 and that's making it harder for people
15:36 to invest successfully in the world's most attractive
15:39 and powerful market.
15:40 - And I know we talk all about the risk,
15:42 but what do you see as the biggest opportunity in 2024?
15:45 - Well, I mentioned AI.
15:47 That's clearly the biggest opportunity writ large,
15:49 but geopolitically there are a surprising number
15:52 of big opportunities that people usually think of as risks.
15:55 I'll mention two.
15:57 The biggest one is that for the last 20 years,
15:59 the most important geopolitical relationship
16:02 in the world has been US-China,
16:04 and it's also been increasingly confrontational.
16:06 This year, that relationship is being managed
16:09 comparatively well, in part because the Biden administration
16:12 facing election and two big wars in the Middle East
16:15 and Europe doesn't want a big fight with China.
16:18 So they're trying to manage the relationship
16:20 more effectively.
16:21 But even more importantly,
16:23 China is facing big economic trouble,
16:26 and they are trying to find a way to not make it worse,
16:29 which means reaching out to the American private sector,
16:31 the Europeans, the Japanese, and others,
16:33 and saying, "Hey, we wanna make life more normal for you.
16:36 "We wanna engage more.
16:37 "We don't want more crises."
16:38 Also geopolitically, the Chinese have lost a lot
16:41 by biting off more than they can chew in their own backyard,
16:44 and their relations now are worse with South Korea and Japan
16:47 who are working now together
16:48 and closer with the United States,
16:50 with the Quad, India, Australia, Japan, the United States,
16:52 building out new architecture,
16:53 Indonesia building stronger relations
16:56 with the US and Japan,
16:57 Philippines offering the US eight military bases.
17:01 For all of those reasons,
17:02 China wants a more stable, managed relationship
17:06 with the United States.
17:06 That's a very big deal for 2024,
17:08 even after the Taiwanese elections,
17:11 which so many people thought
17:12 were gonna lead to a crisis.
17:13 So far, pretty easy, pretty stable response
17:18 by all actors involved, Beijing, Taipei, Washington.
17:21 Finally, this is the year of all these elections
17:24 all over the world.
17:25 We talk about how much risk the US election is driving.
17:27 People worried about all the instability.
17:29 Most of the elections will be just fine.
17:32 Mexico, very smooth.
17:35 The next president, very likely to be the one
17:37 that AMLO wants, Claudio Scheinbaum, a technocrat,
17:40 pro-business, former environmental scientist, great.
17:43 And in the largest democracy in the world,
17:46 India, 1.5 billion people, Modi has 80% approval.
17:50 He's gonna win easily for his last five-year term.
17:53 More economic reform, good relations with the West,
17:56 good relations with the global South, great place to be.
17:59 European Union, plenty of populism,
18:02 plenty of anti-establishment sentiment,
18:04 but the overall election's likely to have
18:06 the same party coalition as what we have right now.
18:09 Most of the elections around the world
18:12 are a lot of stability.
18:13 - And I wanna ask you, before I lose you,
18:16 an old question that you and I have talked about before.
18:19 Who is the most powerful person in the world right now?
18:21 - It ain't the US president,
18:24 because the president's so constrained.
18:26 You'd probably say it's Xi Jinping,
18:29 because he has the second largest economy
18:31 and he's consolidated so much power and can leverage it,
18:36 particularly economically and commercially,
18:40 through a state capitalist system
18:43 to get outcomes that he wants
18:45 with countries that need that largesse around the world,
18:48 mostly in the global South.
18:50 But I would say increasingly,
18:52 the most powerful people in the world
18:54 are the small handful of individuals that are driving AI.
18:59 It's Sam Altman and it's Satya Nadella,
19:03 and it's seven to 10 of 'em.
19:06 And these people are going to create the AI
19:11 in a very short period of time
19:13 that is being trained on our individual data.
19:16 We will use those tools continuously.
19:19 We won't shut it off, and it will change who we are.
19:22 It will make us different from homo sapiens.
19:25 It will make us hybrid human beings
19:28 who act and think differently.
19:30 I'm a little scared by that.
19:32 I'm a little concerned by that.
19:34 It's obviously also very exciting,
19:37 but it's an enormous amount of power
19:39 in the hands of a very small number of people,
19:42 and it's something we need to spend a lot more time on.
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