DO WE REALLY LEARN FROM THE PAST? More on what is Next for the Global Economies from the author of “This Time it is Different…Not!” AIVARS LODE Edited by CLAUDIA LODE Dedication Thanks to all of my mates that I have worked and socialized with through the years, you have all helped me grow tremendously. The following people have had a profound impact on my life‘s many journeys and deserve special mention: My parents, thanks Mum and Dad for all the adventures you provided for us. Mum, thanks for the meals where you drove an hour every night while I was in hospital with my broken neck along with everything else. My father, for allowing me to invest alongside him, his patient counsel when I was young and emotional, and sage advice as I matured. Suzie, my darling wife, partner and Number #1 everything. We have had the most amazing adventures and have grown so much together. I look forward to many more. Arielle and Claudia, my inspirational daughters, for their capacity to learn and just do. My brother, Atis, an inspiration with his untiring energy and the reason I moved to business development; a key change in my life. Mark Waldron, an amazing friend and mentor who opened my eyes to what I could be. Richard Thompson (rest his soul), who gave me permission to be myself, was an inspiration to all, and showed us how to be good humans. Robert Hershenhorn, the most amazing deal mind that I have ever met; he showed me what was possible and inspired me to be creative. ©IT Capital, LLC All rights reserved. Reproduction or translation of this work beyond that permitted by section 107 or 108 of the 1976 United States Copyright Act without permission of the copyright owner is unlawful. Requests for permission or further information should be addressed to [email protected]. 2 Acknowledgments During the past 30 years, I have traveled to over 1,500 cities in 47 countries and met many fascinating people. I have sampled a lot of different cultures, seen a lot of different architecture, discussed the politics and the religions in each of these places, listened to countless stories, completed numerous business transactions, sampled different cultures and foods, and along the way have developed strong opinions of my own. I have lived the crashes of the 80‘s and 90‘s. I have lost on real estate and I have made money on real estate. I have made money on bubbles. I have worked with market makers and market manipulators, with agents and principals, the poor and rich. I have worked with my hands and now with my brain. In 2008, I began to write a blog to share my observations in order to help others to better understand what is next for global economies. This book summarizes my writings and is intended to generate thought provoking discussion of what we have to look forward to in the years ahead. Indeed, these observations are based on the accumulated knowledge and experiences that I have been fortunate enough to experience. In the mid-1980‘s, Australia put in place a dividend tax similar to what was established here in the United States in the mid-2000‘s. In the early 1990‘s, Australia experienced a financial meltdown similar to the one that the United States is currently experiencing. A significant number of my observations are applying what I saw in Australia back then to what we are experiencing today in the United States. Two years ago, I started my blog by stating what is going to happen and why. Today, the articles that I have posted support my predictions. To put this book in perspective, I offer a timeline of my major adventures, beginning with my life up to the age of 20, a time when I focused on sports and school - in that order. At the age of eight, I started delivering mailers with my father around the same time that I started competitive athletics with no particular discipline and the ability to substitute for most of the team if someone did not show up. My specialty was the 400 meters where I would trade lanes to take the inside lane. This meant that I had everyone in front of me when I started, which was a place that no one wanted. My strategy was to pass them all by the half way mark and then make sure I had enough to hold on until the finish. By passing my opposition by the half way mark, I would demoralize them. Therefore, I did not have to be the strongest or the fastest - just the one who would hold on the longest. This is one of the important lessons in life, as Churchill said. Clearly, you don‘t have to be the strongest or the smartest; you just need to be the one who applies consistent effort. I cleaned K-Marts with my father at 15, which required waking up at 5am. By doing this, I was always able to buy the next piece of sports gear that I wanted-- from a kayak to my scuba gear, diving watch to my snow skis, to my hiking boats, my backpack, sleeping bags, cooking gear, clothing, CD radio, surf boards, windsurfers, sails, catamarans, etc. Unlike Warren Buffet, I did not invest in stocks as these were a mystery and I did not understand how to make money without losing it by playing the stock market. Probably today they would have classified me as ADD but my parents found that if they kept me occupied with sports I did not need to be fed drugs and I would end up tired and fall asleep as soon as my head hit the pillow. My parents‘ wanderlust and travel to remote parts of Australia when there were no paved roads and at a time when people were just not that mobile in Australia also contributed to my development. I attribute my CQ skills to the amount of travel and the number of sports that I did during my youth. The ability to not be scared in any situation and the knowledge that I would always work things through set me up for later in life as I started my global career and circumnavigated the globe regularly for business. Thanks Mum, for driving us around everywhere. 3 Another element to my success is the fact that I was born into a well-educated family that values education. My parents convinced me to finish high school instead of going to technical college to become an electrical engineer. Following my days at the university, I spent one year as a full-time ski instructor. A very sage piece of advice from the head of the ski school at the time made me reconsider my career – ―Aivars, go use your degree and then come and pay for schmucks like me to take you skiing,‖ he said. Thanks, Guenter, for the advice. I spent a few years trading commodities. I watched the fall of the Telex and the rise of the fax machine. Indeed, one of the first Fax machines was used in Australia. I lived through the floating of the AUD and Japan‘s Yen while dealing with Forex brokers, shipping companies, insurance companies and banks every day. My next adventure was as an accountant. Preparing the numbers proved to be the most frustrating job to me as the sales guy and the CEO both knew the results even before I had produced them. I knew I needed to be closer to the sharper end of the stick and realized that nothing happened until something got sold. This would be in the back of my mind for many years until I acted on it. That did not last long and when a friend of my father‘s asked me to come and run his company, I jumped at the chance to get out in front and was able to leverage the trading and the accounting to understand what was happening in the business and get closer to the selling. It was there that I installed my first computer system. I was just always ready to try the latest technology; however, I did not have a very good sense of timing. When Barry asked me if it would be valuable to start a Lotus 123 training course, I replied that this had already been done. How wrong I was in my inability to recognize this computer opportunity. I lived through the stock market crash of the 80‘s and watched as my second house purchase proved not to be my greatest investment. Unfortunately, I mis-timed the market and bought my second house before selling my first. In the space of two weeks, over 30 percent was shaved off both houses values. This is how we learn - though our own mistakes or the mistakes of others. I was exposed to oil traders, stock manipulators, Forex market makers and the early days of derivatives. I was also very lucky to have my father as mentor and a number of very good friends that supported me. Without that exposure to what was possible, I may not have chosen the path I did. My brother constantly encouraged me to get into sales and at the time I was installing a large ERP system into a manufacturing company. Again, hadn‘t everyone? Well, the sales guys knew less than I did, but they wore better suits and drove BMWs so there was a clear choice. I decided to become involved with technology sales and my first job was at Dun and Bradstreet Software, which at the time was the largest software company in the world providing mainframe software that could only be purchased by the largest corporations and governments.