Rockefeller's Ruchir Sharma on the markets: AI boom is masking underlying weakness

Rockefeller International chairman and Breakout Capital founder and CIO Rasheer Sharma joins us. He's the author of What Went Wrong with Capitalism? Rasheer, great to have you with us. Thanks, Mr. Thanks for having me. And let's talk about the market composition because it sounds like you're concerned about the handful of companies earning what you call super normal profits, that this should not be the case and that that these companies should have more competition. So in the case of, for instance, NVIDIA, does this symbolize what's wrong with capitalism in the US? Well, I think one company may not, you know, because NVIDIA is obviously capitalizing from the AI boom. But the fact that you have a cohort of companies in the US earning the supernovel profits. And this trend that we have seen in the last couple of decades where industry after industry, you see companies earning supernovel profits and the gains being concentrated in just, you know, like a handful of companies with tech being the the example of that. There's something dysfunctional about capitalism in general because this is not how capitalism is supposed to function. Your capitalism is about churn. Capitalism is about getting new companies to be out there. But the number of startups in America tube right up until the pandemic has been declining and you find that these companies are increasingly gobbling up either any new companies coming up or just simply not align new companies to be formed out there. And I think a lot of this has to do with also the regulatory environment we have where these companies are able to get regulations in their favor or just the regulatory costs has become so high that new companies aren't being able to set up or keep going. So do you think that the, I mean, the remedy for this though, seems anti capitalistic in that you would have to have government intervention. You would have to have, you know, these, you know, rules and regulations in place to stop these large companies from getting larger, from earning more. You have to create an environment in which smaller companies can thrive in. All of that spells intervention into a capitalistic system. Yes. But I think the the intervention is what's caused the problems in the 1st place, as I argue in my book that the number of new regulations introduced by America and in fact around the Western world has exploded in the last couple of decades. America alone has introduced 3000 new regulations a year and they've withdrawn only 20 in total over the last 20 years. And I think that it's that sort of environment, that regulatory capture which is stifling growth. So fine, yes, at this stage we have the excesses may have become so big that you need some sort of intervention to curb the further growth of these companies and earning these super normal profits. But how do you create the environment where this doesn't happen in the future? Otherwise you can do something now, but then five to 10 years later, the same dysfunctionality will keep repeating itself. So it's a harder look about how we got here and what can we do to create a more fertile ground where the small and mid sized businesses don't feel they're being squeezed out with this increased concentration. And I think that this is where we have to be a bit careful. I know at one level we want to celebrate the rise of these companies and the way they're dominating the landscape. But I think the fact that they're earning these super normal profits for this longer period tells us there's something dysfunctional and it's much deeper than things like globalization or technology or platform companies. A lot of this has to do with the regulatory capture of these companies. And they've just become too big now to be stopped on their own. I guess the question I would have, Rashir, is what specifically about the current huge companies that are earning these outsized profits? Do you do you believe is symbiotic with the regulators right now? Because right now, you know, at least the antitrust folks want to break these companies up. They've tried to essentially keep them from having like an industry standard, whether it be in, you know, social media, Internet, anything like that. And when it comes to something like NVIDIA, arguably the seeds for, you know, reducing its profits are being planted right now with over building of these data centers. Yes, Sir. As far the NVIDIA is concerned, it's a bit early to tell, but if you look at the other companies too, they've been around for much too long. And what exactly I mean here, I've cited extensive research in the book to show that the new regulations which I have created just to increase the cost of a new business to come in there. Like for example, I know that setting up a fund, you know, this is a bit different today, is 10 times more expensive than the cost was 20 years ago because you have to comply with so many regulations like out there. So I think that the cost has become so onerous. And then when you have new regulations out there, it is typically these big companies with their incredible lobbying part in Washington that are able to get regulations written which are favorable to them. So I think that something needs to be done about that as well, rather than just antitrust and break them up, as I said, that you do that and five, ten years later you will have new beasts, you know, which would have arisen and then you just can't keep arbitrarily doing that every five or ten years. We just need to look at what's the ground here? Why is it so fertile for the same companies to keep making so much profit and that the churn in the at the top has reduced in the S&P 500 over the last couple of decades?