Home » Tea with emerge85 » The Entrepreneur Changing the Face of Political Risk
The Eurasia Group New York headquarters.
Ian: Mint Tea
Afshin: English Breakfast
“I am not really a tea drinker,” Bremmer says, as we dip into the selection of tea bags provided by his office. “But I’m also not a real coffee drinker either. In the morning, it’s juice. Fresh juice, and then sparkling water all day.”
We sat at a raised table on stools in a glass-paneled office lined with photos of Bremmer with world leaders. Here, Bremmer sharing a panel with IMF Managing Director Christine Lagarde, there Bremmer ringing the opening bell of the New York Stock Exchange, another on stage with then Turkish Prime Minister Recep Tayyip Erdogan, and an even younger Bremmer (not even age 30) leading a delegation to meet then Crown Prince Abdullah of Saudi Arabia.
As the steam rose from the water, he sipped his mint tea and recalled one of his earliest and fondest ‘tea moments’ – an unexpected outing to the Ritz Carlton in Boston when he was a child. Bremmer grew up poor, as he will tell you, in the Boston projects, and his mother was a fierce advocate for her two boys, pushing them hard in school and even pushing their teachers when Ian showed signs of boredom as he excelled in class.
His grandmother, an Armenian from Aleppo, Syria, came to Ellis Island in New York early in the 20th century and once took him to high tea at the Ritz Carlton in Boston. “My grandmother was a political animal, and loved to read the papers and go to the state house. I remember once she took me on the swan boats in the public gardens in Boston, and, afterwards, there was a Ritz Carlton that used to be right on the park, and it must have been the fanciest place I had ever been to in my life at that point. I was probably six or eight years old, and she took me there for afternoon tea. I had never seen anything like it in my life. It was astonishing. The beautifully manicured public gardens, the little trip around the pond in a swan boat, and then tea with my grandmother, who lived until she was 96 and died in her sleep.”
Bremmer will also be the first to tell you that, while poor, he “hit the lottery” with his mother, and that’s where we start our conversation.
“I hit the lottery with my mother”
I’m going to be honest. My dad died when I was four. My mother raised me and my brother by herself in the projects, just outside Chelsea, Massachusetts in Boston. She had not finished a high school education. She was incredibly smart, but not well educated. She wanted to make sure we had every possible opportunity. She was massively overprotective. She had serious panic disorder, and she loved us immensely, and so she would say “my kid’s bored!”, and she would go into the school and ask: “What are you doing for him?” And it was true, I was bored. But to be fair, a lot of kids were bored! But those kids didn’t have my mom. Have you read Hillbilly Elegy yet?
It immediately spoke to me, because here is a kid who grew up in Appalachia, and he’s obviously bright. He makes it out of state, goes to Yale Law School, goes to Silicon Valley, and he’s the only one from Appalachia who makes it. But it’s very clear from reading the book, it’s not that he’s so much brighter than everybody else, it’s because his grandmother is insane in a good way. And she is completely ensuring that he’s going to make it. You gotta understand, I grew up in the Projects. My brother went to Harvard. There were no other kids from the Projects who did that. It’s not because my brother and I were the only geniuses. We were both plenty smart, but when you go to Harvard or Yale, those kids aren’t brilliant, they’re all well connected or lucky. And that’s what happened. In my case, I hit the lottery with my mother.
Pushing ahead in school
In first grade, I tested at third-grade level in math and reading, so I went and attended those classes in third grade. But I did recess and health and music with kids my own age, which allowed me to be both intellectually challenged but also enjoy the right social milieu, which they [the teachers] did for me because my mother was a nut (he laughs) and she made sure they did it for me. The problem was that school only went to sixth grade, so once I was past fourth grade, they didn’t have anything else for me in the same school, so I got a double promotion. And it happened the next year, I went from seventh grade to ninth. I just got pushed ahead randomly because they got backed into a corner. But seriously, that could’ve happened to a minimum 10% of the other kids in my school, maybe 25% if they’d had the same parents. But nobody remotely had those parents. I could tell you stories: I taught chess to one kid, and in a couple weeks he could destroy me. His mom was a crazy alcoholic; he couldn’t do his football scholarship and ended up staying there. That happens all over the place.
“At 24 … you should not be teaching, you should be doing something”
So, because I finished high school young, I started college younger, and by the time I was 24 I had finished my PhD in political science from Stanford. The reason I got the PhD wasn’t because I wanted to be an academic but because I didn’t feel ready for a job when I finished college. Now I’ve done it, I’ve gotten my education, so now I want to go get a job. I taught for a couple of years and I got a fellowship at the Hoover Institution. I didn’t intend to stay, but my old advisor, Bob Conquest, he called my mother and said: “This guy is crazy because he’s going to leave.” So, my mom convinced me to stay, others convinced me to stay, and I hated it. It was great to do, but at 24 with a PhD you should not be teaching, you should be doing something, you should be learning about the world, right? When all you’ve done is book study and research.
But I did have something going for me that was extremely fortunate, which is that my field of study was the former Soviet Union. Not just the former Soviet Union but explicitly the Republics of the former Soviet Union. And I had traveled extensively throughout that part of the world, I spoke Russian, and I had met with a lot of the people who were dissidents and thought leaders and public intellectuals who eventually became ministers, and many of them became presidents in these new countries. So, I had this extraordinary lens into a very interesting transition of global importance, and I also had some real access. So there was some stuff in addition to the political science training and hopefully an ability to communicate coherently. I also had some stuff I thought I knew that had merit and utility to these people in the markets.
Coming to New York
I came to New York in 1996, and I’m not shy, I’m more than willing to introduce myself and talk to people, and, through some introductions, I met some of the ‘grand men’ of Wall Street, and they were willing to spend time with me. They took me to lunches. They spent a lot of time with me, they were incredibly generous with their time. And they clearly found that what I did for a living was interesting. But I wanted a job. And they were not hiring political scientists.
There was no job for a political scientist at Goldman Sachs at that point. There wasn’t one anywhere. So after about a year of this, where I had developed quite an interesting network for someone my age in New York but didn’t have a job, I finally went to one of them for a job and I said: “Look, you’re spending all this time, which I appreciate, but you’re not offering me a job. So, if I were to put out a shingle and start a company around me, would you become a client?” And he said for sure, of course he would. And I had never thought of that before. At no point did I have this intention that I was going to build a firm! And so, within two weeks I had conversations with all the other people I had been speaking to and I had all these commitments to be clients from some of the biggest firms around.
I didn’t know how much I would be charging them, and I didn’t really know what the services were, but they helped me. That would’ve been late 1997, and I incorporated in January 1998. I had $50,000 saved up from Stanford. When I came to New York, I put $25,000 down on my first apartment. So, I had $25,000 to start the firm. But frankly, I could’ve started the firm with only $5,000. There was no risk taken. It was just me. I didn’t hire people until I had clients. And once I had the clients, I started hiring people, and then I was off to the races.
“I called it Eurasia Group, because Eurasia Guy is a bad name.”
I put together a weekly note, which at the time was different for each of those clients, and it was based on what I knew they were interested in, the countries, the issues, and it was my thoughts. It was a research product, if you will. And I also put together some salons with ambassadors, ministers, and even heads of state. Friends of mine, when they came to the United States and Washington, I would invite these clients and prospects with some thought leaders, and I would moderate it, and I never took any money from those places, and I would ask tough questions. I would do a briefing in advance of it, that sort of thing. That also brought more clients in. It was a little bit like a club. It was a little bit like a law firm. It was a little bit boutique-y.
At the beginning it was just me, then me with an assistant, then me and some interns, then it started growing. And the first clients were paying a baseline of, I think, $25,000 a year to have access to me, which, in 1998 for a kid who was 28, sounded pretty good.
When it came time to name the company, I knew I wanted to use ‘Eurasia’ in the title. I was at that point known for it. I had done a couple of books on the former Soviet Union – one with Cambridge Press had become the textbook for it – and I had done op-eds in The New York Times, and the Stanford background, the research on the ground, and the people I knew, all of that helped. I had legitimate bona fides in that part of the world. I did not [have those] anywhere else. So, I called it Eurasia because that was fairly obvious. I called it “Eurasia Group” because “Eurasia Guy” is a bad name (he laughs).
“I didn’t have a business plan, I didn’t have any outside investment.”
You’ve gotta understand. I set up this firm having no exposure to the business world in my life. I did not come to this thinking I was going to start a company. I didn’t have a business plan, I didn’t have any outside investment. I remember when I got my first office space on 26th and Broadway not too far from here, there were a lot of startups. This was the beginning of Silicon Alley New York, and in the building they were hosting wine and cheese events for all the little entrepreneurs to meet each other, and I thought, well, I guess I’m an entrepreneur now so I should go and meet these people. And it was classic: little plastic cups, boxed wine, deli tray cheese. I met some of these people, and the first thing they asked me was what my burn rate was. Do you know what a burn rate is? I didn’t. It is how much cash you are burning compared to how much you’ve raised. Effectively it’s how much money you have left before you need the next round. I had never heard of this before. They had to explain it to me, and I’m like, “Oh, I don’t have one of those.” They couldn’t understand. I said, “I don’t spend money first, I wait until I have the clients.”
I’m a very risk-averse person. I didn’t set up this company with the idea of taking risk. I set it up because I really wanted to have a platform where I could be a more effective political scientist.
From Eurasia to global
One of the hardest transitions I had to do with this company was making the transition between being Eurasia and being global. And I don’t just mean in terms of credibility. I’m talking in terms of my own understanding of how Latin America as a region worked, when I hadn’t ever traveled there. I didn’t speak the language, I hadn’t read all the books, I didn’t know all the experts, and I had to have a platform big enough to hire all of the real experts who would travel with me and I could get inside their heads a little bit and then start to learn it. Malcolm Gladwell was right … once you spend 10,000 hours on something, you actually get pretty good at it. Your brain will find the patterns.
Political risk modeling is not enough
When people ask me about political risk assessment, I’d love to say it’s a model where you put a country in and get political risk out. But it’s not. We developed the first political risk country index that was ever used on Wall Street. We created a set of really rigorous variables we thought we could get data for. For example, rule of law, independent judiciary, free and fair elections. We put all of that into a political risk model. There isn’t one clear statistic, but you can see if judges are paid living wages. You can also see if there are programs to train new judges. And if you put those together, you get a decent proxy for the judiciary of countries.
So, we’ve done that for dozens of variables across 80 countries around the world. We’ve been doing that for 15 years now; it’s a really robust set of data. But you’d be surprised how little we rely on it. It’s a baseline. It forces our analysts to do the work. The fact is none of those models bring in the personal component of how decision-making is done with individual leadership. It’s also really hard to weight those variables.
Entrepreneur advice: Don’t reinvent the wheel every day, and do what you’re good at
It’s really hard to start a company. The amount of actual work it takes to get a company started from scratch is astonishing. Especially when you don’t know what you’re doing. So, one lesson would be that I had great mentors who were global thinkers, CEOs, people willing to be clients, but I did not have a single mentor who had set up a small company. That would’ve been really valuable. I literally didn’t know anybody who had bootstrapped a company before! I got to know Bill Gates before I got to know people who had set up $10m companies. I made so many stupid mistakes in terms of how to set up accounting and pay taxes in the first few years. This caused me a lot of heartache and problems when I had an eight-person firm. So, find other people who have started companies successfully and get advice. Hire consultants.
Now, if we find something we don’t know, we find someone who’s an expert in it and we bring them in for a few hours. We don’t reinvent the wheel. I was reinventing the wheel every day. I was reinventing fire! It was much worse than reinventing the wheel, right? No one should start a company that way. I wasn’t a natural entrepreneur. But to be fair, I didn’t raise money.
One thing I did really well was that when the firm got large enough to be a company, I did not pretend to do things I did not know how to do. So as soon as I had the money to hire a COO, I hired one and let him do all that work. As soon as I could hire a CEO, I did. This firm is way too big for someone with my skillset to be running it.
I am stunned by how many people who are the owners of companies still act like they’re CEO when the company becomes big. And you shouldn’t do that. I really do not manage the inside workings of this company at all, I’m the global macro guy – I drive the brand and I do a bunch of strategic stuff. But in terms of how to run a global consulting firm, I don’t do any of that. That’s a hard thing. That’s a real skillset I have never learned. And the funny thing is, when we hired the CEO, people in the firm thought, “Oh, Ian is never going to let someone do that”. But my life got better overnight. That’s the downside of business. It was taking me away from things I was good at. But as soon as we hired a CEO – with a consultant who mentored him because it was his first CEO job – that made all the difference.