A former Morgan Stanley wealth manager, Hamid Ladjevardi, who is now chairman of American Baltic Investments and a distinguished philanthropist, saw great potential for economic, business, and cultural development in the Baltics during the early 1990s. So in 1994 he resigned from Morgan Stanley to establish, along with his business partner, the first and largest Riga-based private equity fund for the Baltic countries, Baltic Fund 1, L.P. Mr Ladjevardi, who has been a Latvian resident since 2003, kindly agreed to take The Baltic Times questions.
Your parents were Iranian and you’ve spent most of your life in the United States. In 1991, you began spending half of each year in the Baltics, finally becoming a resident of Latvia in 2003. How did your multicultural background contribute to the formation of your outlook and world view?
My world view today has been shaped by my observation that life on earth, including humanity, is diverse, interconnected, and interactive, in a web of universal life. As my most fundamental value, I hold that all life is sacred. So I have learned to understand and accept differences between people and cultures that are bound by the fundamental value that life is sacred. Any deviation from that fundamental value, such as someone degrading life in any essential way because that is part of one’s culture, is morally unacceptable to me. All life is diverse, interconnected, and interactive. What one does in one’s life affects others, in one form or another. As the old proverbs go: ”Do unto others as you would have them do unto you,” and “What goes around comes around.”
The DNA of all humans is 99.9% the same. Concentrating on the 99.9% instead of the .01% makes the world safer, more productive, more creative, and wealthier – both spiritually and materially. Humanity will develop to a higher level of consciousness, and be smarter, if it understands and celebrates its natural diversity. In today’s global population of 7.7 billion people, no two humans are exactly alike. That is the source of human diversity, with its strength of imagination, creativity, innovation, and discovery. It is also a prerequisite for the sustainable development of life, along with the fundamental life freedoms to create and organize transcendent human civilizations.
All humans need to be equal before the fundamental laws of life, regardless of race, nationality, gender, sexual orientation, or any fusion of those. Unfortunately, a culture of impunity and arrogance has spread throughout the leadership of most of the world, particularly in the developing world, which tramples upon people’s lives, rights, and wellbeing, usually through corrupt or bigoted practices.
When Barack Obama was in the White House, the long-strained relations between the West and Iran, where you spent 14 years spread throughout your life, started thawing, promising beneficial prospects to both sides. What do you believe has happened between Iran and the West, and specifically the United States, with Donald Trump as president? Do you believe these countries will go to war again?
The relationship between the Islamic Republic of Iran (IRI) and the West, particularly with the United States, is very complicated, with much historical antagonism since the Islamic Revolution, when American diplomats were held hostage for 444 days. Over the last 40 years the relationship has gone through different cycles, dealing with each other’s grievances with various levels of success and failure, due to deep-seated mistrust and antagonism. The competition between various factions in the Islamic Republic of Iran and policy differences in the United States have made any long-lasting agreement difficult to achieve. There has never been a major military confrontation between IRI and the US, and the probability of it happening in the future is quite low.
You’ve worked for some business behemoths, like Morgan Stanley & Company, Inc., where you were a vice president, a portfolio manager, and a market advisor for 12 years. Previously, you held senior management positions at the Behshahr Industrial Group (BIG), one of the largest and most diverse private-sector enterprise groups in Iran, which your family managed and controlled. Could you tell us about your entrepreneurial spirit, and share what you have learned about making money?
My entrepreneurial spirit is mainly derived from my family, as I am a fourth-generation descendant of an entrepreneurial family. My great-grandfather came from Kashan, Iran, a small city at the time, which is located near a large desert with many great merchants, partly because there was a lack of water there and, therefore, little prospect for agriculture. It was a tradition in our family, as entrepreneurs, to be pioneers in our business activities in Iran, which resulted in the family spearheading the modernization of industry in Iran in the early 1950s.
My father contributed to my entrepreneurial spirit by making sure that I was self-reliant at an early age, and encouraging me to seek excellence in whatever I undertook. The family had a deep commitment to hard work, integrity of character, discipline, and honesty. Our family motto is that our word is our bond.
It is with that spirit that I joined Morgan Stanley as a wealth manager, a few months after I left revolutionary Iran. My knowledge of creating wealth, learned over many decades, comes down to some basic precepts: have a vision of what you want to achieve, and be creative, bold, and disciplined. Work hard and have the courage to face difficulties and failures, learn from your mistakes, and be considerate of others. In that context, it is critical to strive for a healthy balance between one’s life and work.
As for making profits in markets, my experience teaches me that one needs to be bold when most investors are fearful, and not be overconfident or greedy when one is doing well. In other words, to have a contrarian disposition in investment. When I decided to resign from Morgan Stanley and co-create the Baltic Fund 1, LP, many people thought I was being reckless. The progress the Baltic nations have achieved since then, and my return on investment performance, have shown otherwise.
In November 1991, after the Baltics gained their independence, you flew from New York to Stockholm and took a ferry to Tallinn, Estonia. Why? And what are the most striking changes that you have seen in Latvia over the last three decades?
I first came to the Baltics in late 1991 to seek investment opportunities. During several trips to the Baltic countries of Estonia, Latvia, and Lithuania, from late 1991 to mid 1992, I saw great potential for economic, business, and cultural development. In 1994, I decided to resign from Morgan Stanley after 12 years of gaining valuable experience as a wealth manager in various financial markets, to dedicate my time and effort to establishing, along with my business partner at that time, the first and largest private equity fund for the Baltic countries, Baltic Fund 1, L.P.
Through my research into the history of the Baltic countries, particularly during the interwar period of 1918-1940, I realized how developed the Baltic countries were, with mature industries and working democracies, and I surmised that they had great potential for future development, despite having been part of the Soviet Union for 50 years. I believe that the greatest potential of any society or country lies with its people. My decision to dedicate my time and effort to creating a fund for the Baltic countries was mainly based on the willingness of its people to fulfil their potential, suggested by what happened there during the interwar period.
The Baltic countries have gone through a tremendous amount of change since regaining their independence. I remember the long lines of people waiting to buy tobacco or recently arrived cheese when I first visited the Baltics in November 1991. Today, a few minutes’ walk in most places tells a very different story.
What has distinguished their performance is keeping their vision, determination, and discipline to implement the principles of democracy and free enterprise, which allowed them to join the European Union, NATO, the Euro zone, and the OECD. On the economic front, having very low debt-to-GDP ratio compared to many countries in Europe, the Americas, and the rest of the world, and close to balanced budgets – achieving a seven-fold increase in GDP per capita (from about US$2,550 in 1991 to US$17,900 in 2018) over a span of 27 years – are tremendous accomplishments for the Baltic people, especially considering that there have been many different coalition governments, sometimes espousing contradictory policies. Their strong faith in democratic and fundamental free-market principles, even when they were confronted with much suffering and displacement, is a testimony to their history, culture, and a strong desire to join the free and democratic nations. Of course, in this endeavor it helps to have friends, and the Baltics have many friends in America, Europe, and other parts of the world.
What advice would you give to Baltic governments that wanted to improve their business environments?
The Baltic countries have had four major issues confronting them since they regained independence, which are well known to all the Baltic governments and people concerned with the Baltics. The four issues are: declining demographics, corruption, huge inequality of wealth and income between economic classes and regions, and the gray economy. I have written about these issues before.
I believe there are two fundamental requirements to attract investors to the Baltic countries. The first is long-term stability in fiscal and monetary policies, national security, and trust in the business environment. The greatest impediment in this area is corruption, which creates a lack of trust for investors, and cynicism in the population and among working people. The huge disparity in income and wealth between the regions and economic classes is partially attributable to the very fast growth the Baltic economies have experienced since regaining independence, to the lack of real business opportunity in regions like Latgale in Latvia, and, perhaps most importantly, to corruption. I believe the gray economy is also a consequence of low incomes, which leads some companies and individuals to avoid reporting their earnings. More critically, it reflects corruption, as some companies and individuals do not want to pay their fair share of tax, even in the low-tax environment of the Baltics.
The second requirement to attract investors is to address the declining demographics of these strong and growing economies, which puts a major constraint on the availability of labor. The Baltic countries have had some of the fastest-growing economies in EU in the last five years, creating a high demand for labor, skilled or otherwise. Of course, having major emigration, mostly to other EU countries, has not helped. In this context, it would be very productive to have a smart immigration policy that identified areas of labor need, with incentives to attract such labor, along with a policy that was sensitive to the cultural disposition of the people.
Some progress has been made in these areas, and I believe officials know what needs to be done. It is clear that unless more concerted and serious efforts are undertaken, there will be major constraints in developing the full potential of the Baltic countries for the benefit of their people.
You are a senior advisory board member of the nonprofit organization Latvian Foster Family Association, and a board member of the US-based nonprofit organization The Kids First Fund, which is dedicated to supporting the needs of kids that are physically, emotionally, or sexually abused, or abandoned or neglected in Latvia. Why are you involved with these organizations? What motivates you to devote your time to such charitable activities?
Philanthropic endeavors, especially for children, who are the wellspring of our future, are spiritually uplifting. Philanthropy has been a strong tradition in my family, and I have committed to continuing that tradition. I believe that giving, in its many varied forms, is an enlightening experience for one’s spirit and wellbeing. Of course, learning to give without any expectation of return is, in many ways, a cultural phenomenon. I have witnessed many less fortunate people give generously of themselves, by becoming foster parents or guardians to children without biological parents, by helping abused children, or by giving to others during periods of disaster. I have also seen many wealthy people refuse to be generous towards those less fortunate. I believe that the Soviet culture did not encourage giving. I am never too busy to help others, within my capability.
You have been active in organizing Baltic art exhibitions in the US. Could you give us a brief description of your work in this area? You are also a co-founder of the American Foundation for Contemporary Iranian Art, a nonprofit organization that promotes and exhibits contemporary Iranian art in the US. How much are you engaged with that?
With the help of the US-Baltic foundation that I co-chaired, I organized a world premier exhibition of contemporary Baltic art in New York; Washington, DC; Houston; Los Angeles; and Chicago in 2000. In 2012 I organized a contemporary art exhibition for Latvia, with the help of others, including the Latvian embassy in Washington, DC, and the National Museum of Latvia in Riga. This was exhibited in New York; Washington, DC; and Chicago. I also helped organize two major contemporary Iranian art exhibitions in New York and Houston in 2003 and 2004, as a co-founder of the American Foundation for Contemporary Iranian Art (AFCIA). I have not worked with the AFCIA since then.
I heard that, together with your brother, you created the Behshahr-Ladjevardi Contemporary Art Collection, which was one of the most highly regarded collections of contemporary Iranian art. Is that true – and what happened to it?
Yes, my brother, Ali, and I have been very interested in modern and contemporary art for most of our lives. The Behshahr/Ladjevardi Contemporary Art Collection was certainly recognized as the premier private Iranian contemporary art collection in the country, prior to the Islamic Revolution. After the revolution, the art collection, along with all the family assets earned over three generations, was confiscated by the revolutionary court of the Islamic Republic of Iran. I understand that the art collection is now housed at the Academy of Art of Iran, located in the Iranian capital, Tehran.
What else would you like to achieve in your life? Do you see yourself spending your old age in Riga, Latvia?
I would like to continue my contribution to the betterment of humanity in ways that I can, and particularly in the community in which I live, where I can pursue my philanthropic activities. Of course, the betterment of any community always starts with one’s self. I enjoy creative work, particularly writing about life – how it unfolds and threats to its long-term survival, with possible paths to overcome those threats.
As far as the rest of my life goes, I really don’t know how it will unfold. I am basically an explorer-pioneer with an open and curious mind and heart, seeking to learn and develop my potential with an optimistic outlook. It is important to have the courage to pursue one’s vision and hope, even if it challenges the status quo of the time. I will endeavor to go with the flow of sacred life, as it is the only way towards a sustainable path to expand and flourish.