5 | Andy Ho, Opportunities in Vietnam

My guest today is Andy Ho. Andy is the Chief Investment Officer and Managing Director of the LSE-listed VinaCapital Vietnam Opportunity Fund (VOF), which has a net asset value of over US$1.2 billion. At VinaCapital, Andy oversees the capital markets, private equity, fixed income and venture capital investment teams. He is also the author of Crossing the Street, an actionable guide to investing in Vietnam.

In this conversation, we cover entrepreneurship in Vietnam, building a brand and business in Vietnam, and the process for writing his book. I hope you enjoy my conversation with Andy Ho!

Show Notes:

[00:00:30] – [First question] – Background
[00:02:02] – Moving to Vietnam
[00:03:49] – PE investing in the US vs Vietnam
[00:06:47] – What should foreigners know before investing in Vietnam?
[00:09:00] – Vietnam and China comparison
[00:11:52] – Underrated Vietnamese Sectors
[00:14:10] – Female leadership in Vietnam
[00:18:50] – Executive Alignment
[00:20:30] – Building a brand in Vietnam
[00:23:01] – Andy’s book writing process
[00:27:29] – Eastern vs Western Culture
[00:32:44] – Is Vietnam living up to its potential?
[00:35:22] – Underrated skill?
[00:36:26] – Influential books?
[00:38:00] – Andy’s plan for the future

Connect with Andy:

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Transcript:

Kalani Scarrott: [00:00:30] My guest today is Andy Ho. Andy is the Chief Investment Officer and Managing Director of the London Stock Exchange-listed VinaCapital Vietnam Opportunity Fund, which has a net asset value of over 1.2 billion U.S. dollars.

At VinaCapital, Andy oversees the capital markets, private equity, fixed income, and venture capital investment teams. He is also the author of Crossing The Street, an actionable guide to investing in Vietnam. In this conversation, we cover entrepreneurship in Vietnam, building a brand and business there, and the process for writing his book. I hope you enjoy my conversation with Andy Ho. So Andy thank you so much for being here, but I think for the guests who may not know you, could you just explain a little bit about your background and life up until today?

Andy Ho: Thanks for having me on Kalani. Well, my name is Andy Ho. I am the Chief Investment Officer today at VinaCapital. I’ve been with VinaCapital since 2007. Prior to that, I spent time at Prudential’s investment arm, but I think they call it East Spring now. I joined Prudential in 2004. Prior to that, I was at Dell computers in Austin, Texas. I was part of the venture investment arm from 2000 to about 2004. And then prior to that, I was fortunate to earn my MBA at MIT. Before I went to MIT I spent time at Ernst & Young as an auditor. So as you can see I’ve had a very fortunate career so far in the auditing world and the investment world, the venture world, in the U.S. as well as in Vietnam.

Kalani Scarrott: [00:02:02] So when you left Dell Ventures in 2004 to go work in Vietnam, what was your thought process like returning? Did you think it was going to be a permanent shift back? And probably what appealed to you most about returning back to Vietnam?

Andy Ho: Yeah, I think that’s a good question. My wife and I actually came to Vietnam in late 2003 for vacation. It didn’t dawn on us that there was a need for someone with my background in terms of investing background because there was a quite a few life insurance companies doing investments in Vietnam. So there was a search going on to look for someone who has a Vietnamese background as well as an investing background. So it took us a bit of time to think about it. And then ultimately we decided, and yeah the decision was really a short-term decision, maybe three to five years and then return back to the United States. But I think it has a lot to do with developing one’s personal career. If you move too far away from the corporate world in the United States, tendency to think that you’d be disconnected and it’d be hard to reintegrate back to the investment world back in the United States.

So at the beginning it was a short-term thought, but as time went by and as we spent more time in Vietnam, it became clear to us that our background, our roots, and made a lot of sense for us to be in Vietnam. My wife came back on the financial side of Prudential. She moved all the way up to the executive ranks in Prudential and then left. She’s now the CEO of the Generali Life Insurance. So she’s done well for herself as well. So we both basically put down our roots over the last 10, 15 years in Vietnam, on the back of the fact that we are Vietnamese and using our background and education, et cetera. So, at the beginning it was short term oriented, but in hindsight we have taken the decision to stay and be part of Vietnam’s development for the longterm.

Kalani Scarrott: [00:03:49] Yeh certainly looks like it’s paid off for ya, but you mentioned working at Dell Ventures helped shaped your thinking around entrepreneurship, investing and building small businesses. But was there anything you learned that once you applied it in Vietnam, that it had to be either scrapped or significantly changed? Like, was there any culture shock in how you approach investments in Vietnam? Particularly in the PE space compared to how you approach them at Dell Ventures.

Andy Ho: I think it’s easier to make the connection between doing venture investment in the U.S. and doing private equity investment in Vietnam for a frontier market. The similarities are quite moreso than the differences. What I mean is that the level of management, the level of sophistication around corporate governance tends to be lower as it relates to startups in the U.S. and also tends to be lower for private businesses in Vietnam, because they’re effectively family-run businesses if you will. And so that level of thinking is quite similar and that sort of helped me connect the bridge, right? Okay. I’ve seen this before in startups in the U.S. I’ve seen it where folks in their 20s and 30s are trying to start out a business with a novel idea, trying to turn that novel idea into promotional ideas. So the sense of corporate governance, and business development and strategy tends to be on the weakest side whereas they have a passion for a particular product and service that they want to develop.

And it’s quite similar in Vietnam in terms of these private businesses or family-owned businesses that we participated. They too have a passion for a particular product or service, but yet they’ve grown the business in more or less a family-style so I can relate to them. But the things that were different and there were many things that were different, yes the culture, the language, the respect. Again, the folks that we work with in Vietnam tend to be much older, and the folks that we work with in the U.S. tend to be much younger. And the older folks as you can imagine are set in their ways in many things, the way they think, the way they act, et cetera. So we have to be sensitive to that and also convey to them that over time if you do this, this and this, the value of your business grows significantly.

That’s the key I have to sort of learn when we get back to Vietnam and said, “Okay, these are folks that have grown businesses from zero. And the differences that I had to go through in terms of understanding how to deal with entrepreneurship in Vietnam is slightly different from a cultural perspective.” The folks that take the business from zero to $10 million tend to be older, and they tend to be set in their ways, But we need to convince them that there are certain things that they ought to do, the right thing in terms of corporate development, setting up a management team. That they can sort of walk away and allow the management team to run the business on a day-to-day basis and set up a succession plan and build brands and do the things that you need to do to prepare the company to go public. So these are the things that we have to learn how to work with some of the entrepreneurs in Vietnam over time.

Kalani Scarrott: [00:06:47] You touched on some of the societal and cultural aspects when working in Vietnam. So with regards to foreigners looking to invest there, what are some key things that someone should know before investing in Vietnam?

Andy Ho: To be honest there’s so many things you have to be aware of. You’ve touched upon the cultural barriers. Yes, you have to understand that and language. And so do you have to break it down into various buckets if you will, one is you have to understand the macroeconomic situation in Vietnam. It’s probably different from where you came from. Two, you have to understand the political system in Vietnam as well, what can be done, what cannot be done? Three, you have to understand the legal infrastructure as well. All folks that come to Vietnam to do business, they tend to have a crash course on legal infrastructure, what you can and cannot do. And then you have to look at the human side, human resources, understanding how are people motivated to do the things they do in a country like Vietnam? So those are the basic things they ought to think about before they come.

It depends on how they approach Vietnam. Are they coming in as the multinational? Foreigners coming in with their multi-nationals like Unilever, Proctor and Gamble or Prudential, they tend to have a foundation. The foundation is already set for them to come and work in Vietnam. So it’s much, much easier. Those that come to Vietnam for investments like us, it tends to be more difficult. They have to sort of find a way around understanding how entrepreneurs develop and what motivates these folks to do the right thing or do the wrong thing, or for that matter, so that’s one area. Another area is there’s a lot of folks that come to Vietnam to open up new businesses. They could be someone sent in by head office to open up a branch in Vietnam, a legal branch or a multinational senior office. Again, they have to go through the basic understanding of society and what have you. But I think it really depends on what is the purpose of your investment in Vietnam and your participation in this economy. And what sort of foundations someone have set in advance of your arrival?

Those are the various things that come into play as to what they ought to learn in advance coming to Vietnam. So there are many things to think about when they come to Vietnam.

Kalani Scarrott: [00:09:00] For someone who’s new to Vietnam, they might see the frequent comparison with China being the overall growth, the rise of manufacturing exports. But what do you think are some key differences? Either for better or worse between Vietnam and China that people are I guess misguided in their comparisons?

Andy Ho: Yeah. I think people will tend to think that Vietnam is developing in a similar pace as China. I think to a certain extent that is correct. But China’s probably developed at, they’re probably 10 to 20 years ahead of Vietnam. You can see that in terms of GDP growth. China’s GDP growth was in the lower teens, not too long ago now they’re in the single digits. Vietnam had a chance to go into the single teens but we went on to about 10, 11% at one time, but now we’re back to the single digits. So the development and the pace of development is somewhat behind China, but we’re there. We understand, we can see how that’s developed. But I think the key differences that the scale of the economy is significantly different. They have 1.4 billion plus people, we have less than a 100 million people.

So the size, the scale is significantly different, but the way the economy, the practice of the government as it treats foreign investment, as well as domestic investment is quite similar in that they do encourage reinvestment of capital. They encourage foreign capital to come, and then they encouraged domestic approach to reinvest the profit that they make into a manufacturing. And the manufacturing is predominantly to export, to generate hard currency, but as well as to service the domestic economy. And so I think this is quite similar to other East Asian economies like Malaysia, South Korea, Taiwan. Government they encourage folks to reinvest the profit, the machinery equipment manufacturing for developing products for export. And then you can generate the foreign currency and you take that you reinvest further. And so that’s been the model over the last 10, 20, 30 years in east Asia. And that seems to be quite successful.

And I think Vietnam is going down the same model. The only difference is that our scale is a bit different, but we are seeing the fruits of that happening now. And as you can see by the fact that the U.S. China trade war has allowed Vietnam to step up to export significantly to the U.S. What is so much in fact that the U.S. have claimed that Vietnam is a currency manipulator because of surplus, but that’s sort of gone away with the new administration. But it comes to show that we do reinvest the capital, the country does reinvest the profit, and they’re prepared to produce the goods for exports but not only to the United States but to Europe, and they can do it on a large scale. But as far as the economy is concerned, how we compare it in China I think the biggest difference is the scale. We’re nowhere near the scale of China. And we need to keep that in mind that we’ll be humble about that.

Kalani Scarrott: [00:11:52] You touched on manufacturing there, and with around two-thirds of foreign direct investment going into manufacturing in Vietnam. What do you think is an undervalued or maybe underappreciated sectors outside of manufacturing in Vietnam?

Andy Ho: It depends on what angle you’re coming in from. If you’re coming in from a manufacturer multinational angle, there’s not a whole lot you can do. Because I sense that a lot of multinationals want to take advantage of the low labor costs to do manufacturing in Vietnam for export. But if you come in from another angle, like for us for example us we come in from an investment angle. We actually focus on domestic investment, domestic companies to invest in. So we’ll look at other things like for example, services, hospital, and healthcare services, banking, but I have to admit with area and the businesses that we invest in tend to provide the goods and services to the domestic economy rather than to export. And so the value that we provide or the investments that we provide to businesses in Vietnam tends to be that Vietnamese businesses to develop and provide services for the domestic economy, for the domestic growth.

I think in the long term, there are a number of areas that is quite interesting, not only from a domestic investor but also foreign investors perspective is one is mining. There’s a lot of products that have not been mined in Vietnam, and the government keep a very close eye on that. Compared to Indonesia, there’s a lot of mining and different types of products like coal or gas. Vietnam hasn’t really tapped into that area much as of yet. And the second area is there’s a lot of well-trained technical folks in Vietnam. There are well-trained terms of engineer. So the ability to develop high tech in terms of internet online or even healthcare, high-tech can be sourced quite significantly in Vietnam, if you you’re willing to take on working with the technical trainings that the engineers in Vietnam have developed over the last five to 10 years.

There’s a huge group of well-trained engineers that can help businesses develop products and services not only in the online business to digital business, but also in the healthcare business. And so that’s an area where I think hasn’t been really tapped but if an entrepreneur from Hong Kong or Singapore or Silicon Valley wants to invest, then this is a great area to take advantage of.

Kalani Scarrott: [00:14:10] One thing I’ve heard you talk about is the high rates of female leadership within Vietnam when compared to other countries. So I’d love to dive a little bit deeper on that and understand a little better maybe some of the factors that help drive that.

Andy Ho: Yeah. It’s just a theory that I have over the years as we invest in businesses, we sort of work back, right? We look at the business that we invest in, and we feel that those that are led by women tend to do better than men. Then we sort of start diving further, does the participation of females in the workforce, is that number higher than men or not? And it turns out that in some sense it is, because you can imagine if you have a balanced base female and male worker in the workforce in a managerial level as time goes by, the ability for the female to step up to be the leader is the probability is the same, right? Because the population is the same that comes in. And so what we also found is that one of the key differences is that in the culture of Vietnam, education is highly valued.

And as a result, the family do push for the children to be well-educated. And they don’t discriminate between the boy and the girl. They push both. So if you look at the number of people that graduate at the college level, and you look at the female and male population graduating it’s quite similar, it’s about 50/50. So you can see that the amount of education, both for men and women are quite fair and balanced as they leave the university system. And as time goes by, you can also see that a lot of women are able to do well because they’re quite diligent and focused in the financial space. And they’re able to use the financial space and even the marketing space to make their way up to the leadership. And that’s why we’re able to see hey, we have a group of people that come into the workforce, that’s fairly balanced between men and women.

So the probability of a woman leading a business is just as good as a man leading a business. And we go back to the reason okay, well then all things being equal, why is the business being led by women like a pharmaceutical company and being led by a man? Why is the one led by a woman more successful? When we start asking these questions, it turns out that the women they tend to be more focused on the business. The men they do well, don’t get me wrong. They do well but once they’ve done well, their mindset becomes less focused. They may play golf. They often go to me and say “Okay, here’s my handicap Andy.” And say, “Well, you must be spending a lot of time at the golf course.” No woman has ever come to me and said, “Here’s my handicap Andy.” None. Right?

And so it begs the question as well, every time you play a round of golf that’s five hours of the day and if you play three rounds, that’s 15 hours out of the day. And where do you find the time? From there you can sort of think through that the level of focus tends to be less with men and women. And then women again, if you ask more and more questions you find that they’re quite diligent, they’re very detail oriented. And they do listen quite a bit to their executive team and management team. They get the information, but they are very, very diligent. And I think because one, they’re focused and two they have the time to be diligent and to make the decision. Key things is that really need focus is how the women leadership would be, all things being equal as successful men leading corporate businesses in Vietnam.

The other thing is as we also wind the timeframe back, we can see that the older generation of women may be in the 60s, 70s today they’re probably retiring now. You can see that they’re part of the generation that went through the Vietnam war. And going through the war, you can imagine that their husband or their spouse may have participated in the war. And unfortunately didn’t make it out of the war and the woman is responsible for looking after the family and the woman’s looking after the money, and they’re looking after growing the business. They have a higher level of motivation. They’ve been through hard time. And as a result, they’re able to grow a business. That to me is sort of a population game because the number of men and women, women are probably more in terms of trying to be an entrepreneur than men. And as a result they’ve grown up. And as a result, they’ve turned around and they’ve taught their daughters and their sons that women leadership is just as important as men leadership.

Kalani Scarrott: So probably just curious from my end is high levels of female leadership something that’s spoken about in Vietnam, or is it more just a given, I guess?

Andy Ho: Yeah, that’s a great question. No, it’s not spoken. It’s just a given. It’s very natural here. Nobody bothers as to go and do a diversity review of the businesses and say, “Oh, we don’t have enough women.” Nobody really does that. So it’s sort of a natural phenomenon.

Kalani Scarrott: [00:18:50] So to continue on the topic of executives and executive alignment, you’ve mentioned previously about the ways you can achieve executive alignment. But one thing I’d love to understand a little bit better is the idea of forced vacations and maybe how that plays a role.

Andy Ho: I’m not sure about forced vacation as it relates to executives. This came about because I sort of understood how commercial banks operate globally. Commercial banks actually ask some of their managers to take forced vacation. And it has a lot to do with making sure that there aren’t anything funny going on because when you take that forced vacation of two to four weeks, someone else steps into your role for that temporary period of time. And if something funny is happening, then the new person who steps in sort of say, “Well, hang on this is not normal.” And then the flag goes up. So we’ve sort of learned from that. And that’s just one of many, many tools that we may ask the corporations to use, not at the executive level but at the managerial level to ensure that everyone’s interest is aligned with the corporation, and there’s no leakages from the business.

It’s just one of many tools that we would use. But I wouldn’t say I would use that as the executive level. I would say that more dominant at the managerial level to make sure that, “Hey, if you take a four week vacation someone is stepping into your shoes.” Especially in procurement, procurement’s the easiest area for leakages. And if someone’s replacing you for four weeks in procurement, and you’re seeing things that are not right, the flag goes up and then you can sort of investigate. But I think more importantly if people know in advance that they’re going to be asked to take vacation for four weeks every year, when someone else is going to step in, they’re less likely to do these things. It’s like a preventive measure.

Kalani Scarrott: [00:20:30] So in your book, you talk about how strategic buyers in Vietnam often look for the three key elements being brand equity, distribution channels, and scalability. I’d love to talk more specifically about what you look for on the intangible side of the business. So obviously brand is incredibly important, but there’s a lot that goes into a brand. So I’d love to hear specifics of what you think the best company builders are good at in terms of building a brand in Vietnam.

Andy Ho: Yeah. It’s hard to say. I can only look sort of backwards and look, if multinationals like CJ or a Diageo when they come to Vietnam, what do they value most? They value brand. Now we’re going to pay a lot of money for the brand. What is brand equity mean? It means that most people would be in Vietnam recognize this brand and they value to the manufacturing. The ability to manufacture these foods for domestic consumption as well as for export, is also very important. You have to have a good distribution channel, right? Because a lot of times multinationals will take advantage of that distribution channel to put their own products through. And so that’s why we feel that most likely when a multinational come to Vietnam, they’ll value at least two or maybe three of these elements when they look at the business.

So but then, if you look at the entrepreneur and you ask the question, can they build the brand? Can they build the distribution channel? Or can they build the manufacturing? It’s difficult. Each company is different. Each company is different. Each entrepreneur is different. And even in today’s millennials or the younger generation, my sense is they’re good at building brand. And so you can go to them and they can build great brand, but their ability to do manufacturing scalability is a bit more questionable. They’re going to have to rely on the 30 to 40 to 50-year-old person who’s been through operations, right? And distribution as well, because developing operations and distribution does take a lot of experience as well as connection.

Now, how do we do this? How do we do it right? What are the mistakes that we’ve made? So in terms of looking at each of these value proposition of who’s good at doing what it really depends on the situation. And I would say in today’s age, brand-building is completely different from 20 years ago. And it does take a mindset in today who understands social media, who understands digital branding, who understands the traditional channel of television commercial as well. Who also understands promotion, who also understand KOL, how to use KOL properly. There’s so many things that go on today that never existed 20 years ago in terms of brand building. But we do need a new basic, a new generation look at this.

Kalani Scarrott: [00:23:01] Then move on to the process of writing your book. What do your actual writing process look like? Especially on top of having such a demanding job and with a family at home. How do you manage to get it done?

Andy Ho: To be honest, I was very fortunate. I have a gentleman, his name is on the face of the book as well, his name is Joel Weiden. He is our head of corporate communication at the firm. And actually, we were approached by the publisher many, many years ago, because there was a need for investors outside Vietnam to understand Vietnam better and they’d asked me to write this book a while back. And obviously with my job and family like you said, it was difficult. And so Joel and I actually went and we actually recruited a couple of people to write at the beginning. We recruited a lady who was a former writer for the Financial Times. It didn’t work out. And then we recruited a very distinguished professor at a university, that didn’t work out as well. Then I told Joel, “Why don’t you write it? You understand the business? You know where the data is.”

And so he said, okay. So he took on this project. And I think it took him a little less than a year to write this. And I would spend time with him once, twice, three times a week for a few hours. And then he also got a chance to speak with some of the other CEOs of the business that we invest in, as well as the investment professionals around the office. And he sort of knew the people, the stakeholders. I think in hindsight, it became easier working with Joel or someone within the firm because they knew where to go for information. Whereas working with someone outside from the FT or university, they’re struggling to figure out okay, where do we get this information?

And then the other thing is making sure the information is consistent or reasonable as well. So you got to go back and check, right, this is what this person say, we invested 25 million. We made this much money, well hang on. What was the valuation of this business back then? You can invest and you get the number but if the valuation is completely inconsistent, you’re going to be in trouble. So that was sort of the process and I think it worked out quite well. And the publisher is also thinking, what can we talk about next in the realms of Vietnam? And how do we tell the world about the investment? So that’s what we’re thinking.

Kalani Scarrott: Yeah. No, that’s certainly interesting. And not just saying this, but honestly love the book and the examples you gave. Especially because in investing, I love to invert and study what not to do. And I think you illustrated that well. But you touched on a couple points there, but what were some of the hardest parts of getting the book done that you didn’t expect? Was it just getting the writing done itself or?

Andy Ho: Yeah. Recruiting the writing was very challenging at the beginning with a lot of changes. I think one of the key areas is that your memory sort of go away after a while. And, when you go back and say, “Okay, we need a concrete example.” And in your mind for some reason you thought the issue was A, but when you started digging back, it’s actually B. Then you say, “Well, if it wasn’t A and it’s B now, is it relevant to the point that I was trying to make?” And so then we go, “Okay, maybe it’s not relevant anymore. So let’s rethink about what’s the other example.” So I think one over time I’m getting old I guess, but your mind plays tricks on you. And I find that your mind tends to develop memories along the lines that you wish it is rather than what it actually was.

And so it’s important, even if it’s your work on your investment, it’s important to go back and see exactly what happened because most of the time it isn’t really what your mind has created the world to be. So that was a challenge because it took a lot of time. And that was the great thing about Joel. Okay. I would say something and obviously, that was what I thought it was, and then he would do research and say, “Well Andy, it wasn’t that way. It was this way.” Okay. Let’s rethink. And so that obviously took a lot of time. If the issue was not consistent with the point I was trying to make then we had to find another example. And so that was a bit of a challenge. The other challenge we had was also as you read through the book, we could probably tell that we had to fictionalize the character, right?

The manuscript, the original manuscript had all the names. And so you can imagine that isn’t going to be released, right? So we had to fictionalize because the characters do exist in the business community today, as well as government people as well. So if they saw their name in the book and the way it’s been written, I don’t think I’ll be welcomed anywhere around city. So you can also imagine that yes, these are examples but they’ve been edited so that people can appreciate the story, but yet we aren’t getting any people in trouble.

Kalani Scarrott: [00:27:30] Yeah exactly. I think that’s probably the best way to go about it. As a reader, I certainly appreciated the story, but I always did wonder about that.

Andy Ho: But the thing is, if you talk to a couple of smart people in the community, they can probably connect the dots.

Kalani Scarrott: Yeah. That’s true. But to move on more generally, it’s probably clear that there’s both merits and limitations to both Western and Eastern cultures. But from your own experiences, having lived and worked in the U.S. and Vietnam, what parts of each culture have you embodied? And what advice would you give to those with a similar background to yourself?

Andy Ho: [00:28:00] If someone was trying to develop their career and really depends on where they’re coming from, if they came from the United States, and they wanted to develop their career in Vietnam, the only thing to ask them “Well, do you have any sort of roots in Vietnam? Why do you want to develop a career in Vietnam?” If you’re an American person let’s say hypothetically you’re a Polish person living New York, there isn’t really a connection here. Why do you want to go back to Vietnam? But if you’re Vietnamese descendant and you grew up in United States, you want to come back to Vietnam, my advice for them would be look, do the hard work in the U.S., learn the basic stuff. And that really means spending at least 10 years at a corporation or two or three corporations in the United States and develop a few things.

One, develop the discipline. There is a way of doing business in the U.S. that there’s a discipline, there’s a level of respect. There’s a community, there’s a teamwork that you have to develop. With that experience, when you come back to Vietnam, the value is quite significant. But if you’re sitting in Vietnam and you want to develop your career in Vietnam, it’s completely a different angle, right? Then obviously so if you want to go into the investment world, a lot of people want to, they like to go to the investment world, they think it’s a sexy business. The first thing I tell them, it’s not a sexy business. It’s about learning. You really need to appreciate and like to learn. Investments all about learning. If you don’t like learning, you don’t want to spend time reading the books, reading the financial statements, asking things, and you see something that’s inconsistent in a financial statement and go look for it, go Google it, research it.

If you’re not into that, then investment becomes difficult because you’re not able to connect all the dots to understand what’s happening in the business. So I would encourage them to learn and to be able to want to learn, to be motivated to learn. But as a career I tell them, go to the big four. The big four is a great place to lay your foundation. I went to Ernst & Young in my early years. It taught me how to read financial statements. It also allowed me to be able to work with leaders in the business, the chief accountant, the CFO at the corporation, and be able to develop a relationship with these folks and develop a language to talk to these folks as well. Speaking to you about the investment world. And the other thing that came out of the big four back then when I drove was the big eight, you learn a level of ethics and morality that will teach you that what’s right and what’s wrong.

And that’s very important in the investment world because ultimately you’re probably not investing your own money. You’re investing someone else’s. And they’re going to have to trust you to invest that. And you have to develop a working ethics at a place like the Big Four that allows you to develop it. And investors say, “Well, if you don’t have investment experience, but you do have Big Four experience okay, I can appreciate that because there’s a level of ethics that you’ve learned through these organizations.”

Kalani Scarrott: Overall in Vietnam as an investor, are there any overall themes or trends that we haven’t covered so far? Like what are you most excited about as an investor in Vietnam?

Andy Ho: We can sit all day and talk about that. I’m excited about many things about Vietnam in terms of investment. But I think by and large we do like to focus on sectors and companies in those sectors that contribute to the growth or part of the growth of the domestic economy, right? You have a population that’s almost a 100 million people, and the GDP per capita is about two and a half to three and a half 1,000. So it’s on the lower side. And so you can see that if all goes well, these people are going to get wealthier and wealthier on the average, about five to 10% wealthier each year. Because as GDP grows, they get wealthier. And they’re going to spend money. They’re going to spend money on transportation, on healthcare, on financial products, on food and beverage, on clothing and all this stuff when they spend money, these are great areas for people to invest them.

When you look at, you’re probably European, and you look at the European economy, the GDP per capita is quite high already. And the ability to grow further and further is quite limited. And as a result, whatever you sell, you can still sell it but the potential is much less simply because the growth of their wealth, isn’t growing as fast as folks in Vietnam. So we play on the fact that produce a product that more and more people as they come into this wealth class, maybe call it the middle-class if you will. As they go into the middle class, they’re going to buy more and more. We want to invest in hospitals that as they reach this middle class, they’re going to use more and more and that’s what excites me. And that group is getting bigger and bigger and bigger every day. And that’s what these businesses have become so successful in. But we can certainly dive down each of the sectors, where are the exciting parts? Where are the risks as well and where can things go wrong?

Kalani Scarrott: [00:32:44] So when comparing Vietnam against itself, do you think Vietnam is living up to its potential?

Andy Ho: Yeah. I think different people have different answers. I like to say that Vietnam is developing at a pace. It is a good pace. We actually tried to go at a faster pace in 2008, 2009, 2010. But if you go too fast and what the economist will tell you is we create a situation of instability and instability is measured in terms of inflation. Instability is measured in terms of devaluation of the currency. It’s like driving a car, right? If your car is meant to be driven at a 100 kilometers to 120 kilometers, but you actually drive at 200 kilometers and you can probably do it, but I assure you can’t run it at 200 kilometers for six hours straight and don’t expect anything to go wrong. So I think the economy in Vietnam just like many other developing economies around the world, there’s a pace with that if they get into that pace it’s the sweet spot they’ll develop at that pace.

Much more than that, it’s going to cause a side effect. And I think Vietnam is at that pace at the moment and when people recognize that pace and they can look at the companies that benefit at that pace. When I say companies that benefit at the rate of a GDP growth of six, 7% per annum, usually we see the pace of growth in the business to be about three times. So hypothetically, if the economy is growing at 5% per annum in terms of GDP over the next three to five years, we would expect a company to grow about 15%. Okay. And here’s why. One is, you have to grow a GDP level. That’s basic. Two, you would grow GDP’s measured in terms of real. So it doesn’t have inflation in it.

So you’ve got to build some inflation. So let’s assume inflation of another 5%. So you need a 10%. And when we make the investment, we like to think that we’re investing in the best company in that sector. So we invest that means you have to grow above the average rate. So add another 5%. So the rule of thumb is that the economy is growing at X, we’d like to see that the business we invested grow at 3X. And that’s sort of the typical ideal rate of these businesses. But if they came back and say “I’m growing at 7X.” Then we say “Whoa, do you have the foundation to grow at 7X? Are you going to borrow too much money? What are you going to get the people to produce? Are you going to be paying too much money for the people and corporate governance? Do you have proper corporate governance in place? Are people going to leak money left and right, because you don’t have proper corporate governance?”

There are many, many questions that come into play when someone comes to you and say, “Well, I’m growing at seven, eight, nine times GDP level.” Right? If someone came to me and said, “Oh, no, I want to grow safely at three to four times GDP.” I say “Yeah, that makes sense.”

Kalani Scarrott: [00:35:22] To move into my closing round of questions, what is the most undervalued experience university-aged students don’t give weight to? What’s an underrated skill or an experience that you think they should have?

Andy Ho: They should have coding, programming. My son’s going through school now he’s at Purdue University and I can’t impress upon him how much engineering discipline and coding is so important. Once you have the discipline and you leave, the math, the discipline and the coding, you can find yourself in many, many types of situation, then you’ll be quite valuable. Right? I think a lot of the students when I went to college, I was fortunate because I went through and I studied computer engineering. But a lot of folks, they didn’t think about it that way and they find it difficult to find jobs later on in life. And a lot of them have to go back to school and actually take on coding. Right? And so I think it’s a key skillset and it doesn’t take a whole lot. It’s just like a language, right? It’s like learning a language even simpler. In language, it’s done in alphanumeric and it’s done in English, right? So if you’re an English speaker, it should be easy.

Kalani Scarrott: [00:36:26] For sure. And it’s only getting more important by the day. For you personally, are there any books that have been very influential in shaping your world view?

Andy Ho: I wouldn’t say there’s one book or two books. I think I’ve appreciate reading a lot of autobiography, and seeing how people develop all the time and Steve Jobs got a great book on his autobiography. You have other leaders. When you read and when you sort of understand how they approach some of the challenges that they have in their lifetime. But I have to admit the autobiography that they themselves write is not as valuable as the autobiography that someone else wrote. Right? Mao has a book out and if you read it from someone else’s perspective, you can see there’s a different angle to the whole. So if I were to tell people look, if you’re going to read books, try to read as many autobiographies as possible and try to get the ones that are written by third party.

And so these leaders, they are leaders by default, they’ve done very well. Right? They’ve done something right. The key is trying to understand how they managed some of the challenges that they faced through their lives and what are those challenges? And because those are most likely, unless you’re going to be a generalist, if you’re in the business world, you are going to face some of these challenges.

Kalani Scarrott: Yeah and I guess that goes well with what you said previously about how you imagine something happened isn’t quite exactly how it probably turned out. So, when someone else looks into it ends up being a totally different story.

Andy Ho: Yes, that’s exactly it. So when you write your own biography everything is rosy and when somewhere else writes it, it wasn’t that rosy.

Kalani Scarrott: [00:38:00] So my final question is what plans or vision do you see for yourself in the next five to 10 years? What areas are you most curious about going forward?

Andy Ho: Yeah. So again, I love to learn. A few years ago I actually sat down with my son to learn about cryptocurrency, look at blockchain, the technology, what makes it important. And aside from using it to make Bitcoin, what and where’s the application. And this is an example of curiosity, trying to learn. Going forward, right now I’m spending a bit of time looking at quantum computing. What is the application of quantum computing? Is it even feasible? Right? And there’s another branch that goes out is molecular computing. It’s maybe a little bit easier than quantum. But my point is every year or two, I tend to pick up things, I want to learn and go deep dive into it. But I think ultimately I want to be able to wrap up the things that I’ve learned over time and go and teach at a university.

So I don’t see myself in this world maybe more than five, 10 years, any more than five, 10 years. I think the value add for me would be to take what I’ve learned and go teach at a university, whether it’s a local university in Vietnam or somewhere in Europe or United States, perfectly fine. Being able to see the next generation of folks to come up to replace me, to sit in my seat. That’s the beauty of this whole thing. Someone who has to sit here. I’m not going to sit here forever. And when they sit here, I want them to grow the AUM, three or four times what we have today.

Kalani Scarrott: [00:39:30] Oh I absolutely love that answer. The curiosity and optimism is just infectious. So Andy, it’s been an absolute pleasure today.

Andy Ho: Sure. Sure. I hope that helps. And if you have any other questions do let me know.

Kalani Scarrott: There we go I guess. Andy, really appreciate it again. I think people are going to take away a lot from this. So yeah cheers. Thanks for being on.

Andy Ho: Okay.

Kalani Scarrott:  If you enjoyed this podcast episode, be sure to check the website, compoundingpodcast.com. On the website you’ll find every episode complete with transcripts, show notes and other related resources. Also be sure to sign up to my weekly newsletter, Curated by Kalani, where I share what I’ve been reading, learning, and watching for that week. Same as the podcast, it’s compressed to impress and I aim for maximum return in the time invested. So sign up at kalanis.substack.com. You can also connect with me on Twitter @ScarrottKalani. Once again, links to all content mentioned will be in the description. But until next time, have a good one.