Karen Karniol-Tambour on Investing in a More Fragmented World

Ajouté : 2026-05-15

[00:00:00]Karen, how would you describe the global economy?

[00:00:02]>> It's a very unique economy relative to what we've seen over many decades because it is basically being dominated by two massive forces that are not stopping. One is the very different geopolitical paradigm we've we're in.

[00:00:22]We've called it modern mercantalism, but it's very different than the world we were in, which was, you know, more efficiency, more integration.

[00:00:31]>> What does that mean, modern mercantalism?

[00:00:33]>> It means that every country sees its role much more as needing to maximize wealth and strength of its own country and go after any choke points, any vulnerabilities. Right? If there's anything to be learned from the mix of what's happened on trade, what's happened on Iran, is that whatever vulnerability you have as a country, it will be weaponized against you. It will be weaponized against you. And you should spend all your time, all your energy, all your resources at the sovereign level going after defense, going after infrastructure, going after things like rare earths. Whatever your vulnerabilities are, you need to go and build them. And back to what the global economy is, that is spending that's not cyclical. It's coming from this view that the world is changing where you can't rely on your allies where you have to maximize your own wealth and strength. So you need national champions and you need to worry about your own resilience. And by definition that's very inflationary spending because instead of saying let's do things in the most efficient place, you're saying well I've got to be resilient on my own. By definition that's not the most efficient place. If it was I would have done it there. I need to do a double do to make sure I'm resilient. I'm a fortress. You look at the way that China's thought this way for a long time and that's clearly been very successful. Look how insulated they are during the Iran conflict. Everybody's going after the spending. So that's sort of force number one. And then >> is that a good thing for us to want to be insulated in the way that China is.

[00:02:00]>> Well, depends what you mean by good or bad, right? It's the reality that we're in.

[00:02:06]And it's hard for anyone to look at the world and not say that is the reality that we're in. I really can't rely on others. I really do have to worry about these choke points being weaponized against me. So if you United States, you could say, well, maybe it's a waste for us to do rare earths. Maybe we don't like the fact that it's a toxic process and we don't want to do it. Okay. Well, that is being weaponized against the United States. The United States doesn't have a lot of choices, but to say, you know, let's work and they can choose whether to do it more or less with allies. But the world has shifted to where the paradigm of let's just have integration and do things in the cheapest possible place is just not going to work without you feeling like you could be taken advantage of or that will be weaponized against you. And then you add to that what of course is the massive desire to build out AI infrastructure because scaling laws have continued to work. There's evidence that the bigger you go, the more you build out this infrastructure, the bigger models you can run, there'll actually be a payoff to that. So it's worth doing and you get another huge source of spending. So back up to what kind of economy this is, it's an economy that has that's strong because you have a lot of spending that's not reliant on demand that's going to kind of keep running.

[00:03:15]It's inflationary particularly in physical world because you need to literally, you know, build out these data centers. You need power, you need defense, you need physical things and there's only a limited supply of how many of them they are. And it's a kind of misshapen economy because a lot of this spending is not necessarily that employmentheavy. So the headline numbers can look a lot better than it kind of feels like on the ground. Most people would not have predicted oil being over $100. But here we are. And if it persists, then we're likely going to see inflationary impact. Consumer prices are going to go up. If that's the case, if we're now operating in a high inflation, very volatile environment, how do people invest? It's not volatility in and of itself that's a problem. It's the fact that portfolios are very similar across the world and not prepared for the particular set of circumstances of where the world is taking us. And so almost every portfolio you look at around the world is highly concentrated geographically, highly concentrated in US equities and has very little exposure to real assets. So as you go through this world that is pressuring physical assets so much and where inflation becomes a relevant consideration again when it hasn't been there for very long.

[00:04:33]Almost nobody has enough inflation protection because very few companies they own are actually backed by hard physical things that are what are being demanded in the real world. Um people have sort of come out of a lot of the type of emerging market exposures that are really backed by things. commodities aren't as popular and so this world that really benefits physical assets people are not that prepared for it. The second piece is that you're going into this much more fragmented world and being so US focused just gets people overly concentrated in the way things could play out. there is, you know, the US has such a high share of global market cap and there's been just a desire to invest here and now folks are looking around saying, "Wait a minute, I have so much exposure to the US, so much exposure to the dollar. Do I really not want to be more diversified in a world that is becoming more fragmented um because of these issues?" And so volatility in of itself can be fine if you can use it as an opportunity. The other thing I would say about volatility is that the world has moved so much into liquids that the ability to change your mind, to be agile, to respond to what's happening has just gone way down. So if you step back and say, "Okay, I'm going to have an environment where AI could be threatening all sorts of industries."

[00:05:44]That's not necessarily a problem if you're not locked in to whatever industries you're in and can't make any choices. So if your whole equity book is private equity was invested five, seven years ago in whatever set of industries were done then you just lose a lot of your agility to kind of respond to the time. So the volatility can be good if you can take advantage of it, if you can respond to it and if you can be resilient to different directions that it could take you.

[00:06:09]>> How disconnected does the market feel from the real economy?

[00:06:14]>> The capex phase, we're in the midst of it. I think it's a big part of answering the puzzle you're laying out, Stephanie, of how could it be that there's this divergence. Well, this is the biggest capex boom of all time. We know that massive capex booms support profits in this very mechanical way, right? Like one side writes it in depreciation, one side writes it as profits. It can build on itself. We also know that that boom is not very employment intensive because you are more or less you know buying magical boxes from Taiwan and buying some magical stuff from Korea. You're not employing lots and lots of people to build these data centers. So we're in the midst of this capex boom of AI and that's what's dominating US growth today. If you look at US growth today, the big piece of it is it's being supported by AI capex. AI adoption has not yet gotten to the point where it is you know kind of hitting the bottom line macro stats. The analogy I would have is if you look at what happened to manufacturing where over something like 10ish years we took about 10% of the population and kind of got them out of manufacturing employment partly going to poorer countries and partly being automated. So a typical manufacturing employee is a lot more productive today than they used to be. that process, you could say it all ended up okay, right? We don't have like massive widespread unemployment because of it, but it was unbelievably disruptive. And you could argue that the political and social consequences of that are still with us today. And the one thing I think we know about AI adoption is it's very hard to believe that process won't be bigger and faster.

[00:07:54]It's very hard to believe that it'll take longer than 10 years and not less.

[00:07:58]That it'll be less than 10% of the workforce and not more. So whether you're optimistic or not about the ending spot, the disruption along the way is a very big deal and that has barely gotten started. We're mostly living with a market that is euphoric because of the capex phase which is supporting so much.

[00:08:15]>> Traditionally, when the world faces economic crises of sorts, the US is the global leader.

[00:08:24]Given how divided things are right now, if things were to get worse, do you see the US coordinating again and working together with our allies, or are we in a whole new landscape?

[00:08:36]>> I think we're clearly in a whole new landscape of everyone out for themselves. Different countries are setting up their own ecosystems and these are important investable opportunities for people. And so, you know, if you kind of look at the spectrum, there's countries like Germany that hadn't previously been big borrowers. So, they have the room to be going out and borrowing. And that's why the market's excited to say, "Wait a minute, these guys are actually going to borrow. They're going to do something.

[00:09:02]They're going to try to bring the capital back in. This will become its own sort of ecosystem. Europe will be even more its own defense ecosystem."

[00:09:10]They'll have to be they'll have no choice. If you look at AI, the obvious, you know, kind of silicon curtain that's forming is that China is looking at this and saying so much is being done to kind of contain China, right? limitations on what they can bring in, limitations on what they can import that they're hellbent on developing their own and making sure that they have kind of top- down um support to form their own competitors to whether it's chips or memory or foundaries any one of these companies that they have limitations ASML UV machines they're going to try to make their own. So that becomes sort of its own ecosystem that you look at a company and instead of saying is this the most globally competitive company or you know can Nvidia or TSMC do better the better question is well are they protected do they have a top-down perspective to create a national champion that will create that captive market that'll make sure that these companies are developing to kind of do their own thing look at cars in the United States we're just not letting in the Chinese cars that are just you know sort of better than US cars that's going to be a car market that's kind of its own. So, you're getting these pools that are in different ways, captive markets, protected by their own industrial policies. And so, for investors, that's a big shift. And you don't want to be in only one of those pools. You want to be able to find the investable opportunities in these pockets that are kind of closing in on their own walls because of the world forcing that resilience, that its own market, and that fragmentation.