Investment Migration: An Anti-Fragile Industry

The opposite of fragile is not robust but, rather, anti-fragile. Nassim Nicholas Taleb popularized the concept in his 2012 book Antifragile: Things That Gain from Disorder. Whereas a robust system can withstand volatility, harm, pressure, shocks and chaos, an anti-fragile system, by contrast, is improved by exposure to such conditions and needs adversity to thrive.

I contend that the investment migration business is just such an anti-fragile industry because the scale and scope of our activity grow in tandem with global crises. Whenever, somewhere in the world, there is a war, a financial crisis, a revolution, a natural disaster, a nuclear plant leak or hyperinflation, more investment migration companies open up shop and existing ones expand their operations.

Consider, for instance, the tremendous growth spurts our nascent industry experienced in response to the so-called Arab Spring, or to food the contamination and pollution crises in China, or to the introduction of FATCA, or even the election of François Hollande with his 75% tax bracket.

If there is one line of work that is poised to benefit from the next global financial crisis, it is investment migration. Here’s why: economic crises encourage asset holders to move.

But doesn’t the occurrence of a financial crisis mean people have less money, making investment migration less affordable? It’s not that simple. Those who sell before the bubble bursts gain wealth while those left holding the securities at the time of the crash lose, but a market crash in itself causes no net gain or loss of assets in the economy as a whole. If a bank goes bankrupt, for example, many of its debtors are off the hook. Similarly, in a monetary crisis, while nominal value (the worth as measured by fiat currency) of an asset may be wiped out, the underlying asset (the building, the factory, the copper mine, the bicycle repair shop, the rice paddy) is still there and owned by someone.

Similarly, in a situation of hyperinflation, people on fixed incomes suffer; people with mortgages become virtually debt free. Whatever tumultuous changes occur in the paper value of assets, the real wealth merely changes hands.

So, after a crisis, there is still plenty of capital, but the tumult has redistributed it very abruptly. But a financial or monetary crisis is often followed by a reduction in economic activity, increases in taxation, antipathy towards the rich or social unrest, all of which are factors that prompt many asset holders to relocate.

Investment migration, in short, benefits from turmoil and is, as such, an anti-fragile industry.

What are the moral implications? As with every industry that directly profits from distress, there is an element of moral hazard (think Military Industrial Complex). Naturally, we cannot sit around and hope for (let alone instigate) calamity to befall the world so that our industry will grow. We can, however, take comfort in knowing that when misfortune does inevitably strike, we can provide a vital service.

Just as if there were no crime left in Gotham City Batman would be out of a job, so too, if the whole world lived in peace, freedom, and affluence, investment migration professionals would find themselves running out of business. Were such a day to come, I would be more than happy to change careers, but that scenario seems unlikely in the foreseeable future.

 

Image credit: Aftermath of 1906 San Francisco earthquake. Photograph by Chadwick, H. D, public domain license.