An extract on the live transcript has been included below. To see the full version of the interview, click here.

Rachel Pether:
Hello, everyone. Welcome back to Salt Talks. My name is Rachel Pether and I'm a senior advisor to SkyBridge typically based in Abu Dhabi. I'm also the MC for Salt, which is a global thought leadership forum at the intersection of finance, technology and public policy. Salt Talks are a series of digital interviews that we launched during the work from home period.

For today's guest, we are very excited to welcome Mark Stoleson to Salt Talks. Mark is the Chief Executive Officer and a partner of Legatum, a global investment firm based in Dubai with a mission to generate and allocate capital to help people prosper. Over the last 16 years, Mark and his partners have worked together to build a world-class investment fund while pioneering a number of high impact philanthropic endeavors, which I'm sure we'll hear more about later today. These include the End Fund, the Freedom Fund, Luminos, the Legatum Center for Development and Entrepreneurship at MIT, and the Legatum Institute Foundation in London. Prior to Legatum, Mark was a corporate finance and M & A attorney with Akin Gump in Dallas, Texas, and also Moscow, Russia. He earned a BA in international relations from Occidental College, and a master's in law from Duke University. Mark, it is a real pleasure having you with us today.

Mark Stoleson:
Rachel, great to be with you. Thanks for having me on.

Rachel Pether:
So I completely paraphrased your bio there and I apologise for that. So maybe before we talk about Legatum, tell me a bit about you and your personal background.

Mark Stoleson:
Well, I actually thought you did a great job. That's just about it. But just my personal background, so I grew up in a great, but fairly normal American middle class family in Phoenix, Arizona. Both my parents were first generation college graduates. My dad served in the military and my mum was a pioneering young CPA in the 1960s. I think from the two of them, I got a lot of who I am today. So hard work, focus on service, taking care and looking after your neighbors, and just the values that I have. I think some of the values that Legatum has just from where most of us get our values, from our family. One of my partner says a great phrase that we've really adopted and is kind of the firm motto, which is that 'life is not about what you get, life is about who you become'. I really think my parents infused that spirit and those values in me and you can really see them expressed in what Legatum is all about today.

Rachel Pether:
I love that. And I guess that's a nice segue to Legatum itself. It's obviously quite a lofty name. What does the name actually stand for? Tell me a bit about that.

Mark Stoleson:
Legatum is Latin and it means legacy. The Latin word for legacy is actually a legal term and it means a gift or a bequest to the next generation. So if you were writing up a will, a 'legatum' would be the gift. It would be, I 'legatum' Rachel my car. The car would be the 'legatum', you would be the 'legatee', I would be the 'legator'. So it means gift, and the idea that we seized on was we've got a limited amount of time on this planet, we want to do our best to make it better for the next generation. We feel like we stand on the shoulders of giants that came before us. We inherited a bunch of wonderful things. What can we do to make it better for others? So that's what Legatum means, and it really drives a lot of who we are and what we try to do.

Rachel Pether:
I know that you were previously in Moscow before. When was it that you made the move to Dubai? How did you come about moving to the UAE?

Mark Stoleson:
It's a bit of a funny story, but I was sitting in my office. I was a young lawyer working in an American firm in Moscow, just doing corporate finance work. And a recruiter just called me out of the blue, I was sitting in my office, I don't know it was probably a Saturday, and she said, "Look, I have this very off-the-wall opportunity, but it's in Dubai. So just stop me right now if that's completely off the table and if you have no interest moving to Dubai." This was 2004, maybe 2003. And I was interested. I was just immediately keen to know more, but I had no idea where Dubai was. I remember holding the phone to my ear saying, "Absolutely. No problem with Dubai. Tell me more." And I was Googling Dubai. Where exactly is Dubai?

So that's how it all started, and that was 16 years ago. And it has been an incredible adventure. One that I didn't expect. I came for a job, but I really wound up teaming up with some incredible partners and an amazing team that has a purpose and a sense of mission to not only build a world class investment organisation, but to use the capital that we generate, like you said, to express our mission, which is to help others prosper.

Rachel Pether:
I love that. And I remember doing the same when I had the opportunity to move to Abu Dhabi. I mean, I couldn't even spell it at first. You were active in emerging markets as Legatum before many people were even venturing there. What drew you to the emerging markets initially?

Mark Stoleson:
Yeah, I think some people when they look at our history, they instinctively think that we're an emerging markets fund or that's the focus of our business. And it is, but it really isn't. So something that makes Legatum quite distinctive is that we only manage our own capital, so it's all proprietary capital. And that gives us a huge competitive advantage in that we can take a very long-term perspective and we can invest in any sector, in any country and really are the masters of our own destiny. So that's the core of what makes Legatum different, and because we have long-term capital, we have a long-term perspective and we're looking for companies that can create long-term value. That's just a good fit for our capital.

So historically we've been looking for great secular growth stories in companies or companies that are innovating and disrupting, creating long-term value. It just so happened that for several decades, you could find those types of opportunities in the emerging markets. But we're not wedded to that, and today we would be looking for a more nuanced view of emerging markets within global markets today. So you might find in emerging technology or maybe in a subset of some country that's really emerging and really beginning to innovate and create value. So we don't think of ourselves as emerging markets investors, but we are looking for emerging trends and emerging opportunities.

Rachel Pether:
So what would be some examples of those that you mentioned within emerging opportunities? What are some areas that you're currently looking at now?

Mark Stoleson:
For us the way that we look at opportunities is through a very big lens, a very simple lens, actually that we call a 'simple, big idea'. We say that we stand on the moon and look back at planet earth and say, "Where are the opportunities today?" And so just try to make it really simple. Where is there growth, and what kind of simple, big idea can we express with a really great company? And just looking at a country like China, for example. Lots of people have different opinions and perspectives on China, but the reality is that it's expected that China's middle class will grow by another 300 million people over the next 10 years. It's expected that they'll add about $5 trillion worth of consumption over the next 10 years. So if you think about that for a second, that's like almost the entire population of the United States moving into the middle class in China.

So we sit around thinking, "Well, what's that going to do? What are those middle class people going to want to do?" Well, they're going to want to do what all middle class people want to do around the world. They're going to want to buy things and they're going to want to improve their lives. And so when we ponder that and say, "Well, how can we express that in a company that's well run and that really has amazing opportunity to grow and create value over the longterm?" It would look like a company like Alibaba. So that's a very well known story, but in our opinion, it may not be known as well as it could be or should be. We just feel like it's got a very long runway and has a lot more value that it can create.

For example, when you look at Alibaba, people think of it, I think in shorthand as the Amazon.com of China. And that's not totally unfair. Like Amazon, it has an AWS cloud based service. Amazon's is worth, recently when I checked $750 billion, and that's the whole market cap of Alibaba. So that gives you just a sense of the growth, potential of Alibaba as both an online consumer platform and AWS and FinTech. It's just a great way to express this simple, big idea that the Chinese consumer is rising and will do so for a long time.

Rachel Pether:
I mean, 300 million people coming into the middle class, as someone from New Zealand, that number just blows my mind. I mean, that's a hundred times our entire population.

Mark Stoleson:
Right. It's hard to wrap my head around. I'll give you one other example real quick and that is when we look at a country like India, it's expected that by 2030 India may be, or should be the third largest economy in the world. So, what happens as an economy of that size grows and expands, well, you're going to see changes in the capital markets and how businesses are financed. So one of our other investments today is in a company called the National Stock Exchange in India. It's the number one stock exchange in India. And as you see bank financing beginning to morph into capital markets financing for growing businesses, this company should be well positioned to be a leader. And it's got EBITDA margins of 78%. It's highly profitable, well-run, number one in its space and in a growing country. When we have long-term capital, we're looking for longterm value creation, it's those types of companies.

Rachel Pether:
And is that related to micro-financing or is that more like SME corporate lending?

Mark Stoleson:
National Stock Exchange in India would be kind of like the New York stock exchange of India. It's everything. It's equity, it's credit, it's derivatives, and they are either number one or number two in all of those spaces. So it's just well positioned to capture that entire market in India. But you mentioned micro finance, that's another great story. So that's a great example of the type of thing that Legatum invests in, and many years ago, we were captured by this simple, big idea that there are 450 million unbanked people in India, so people that have no access at all to any banking services. Well, that's a problem, but that's also a huge opportunity. And you saw the emergence of private sector, microfinance companies getting out there into rural areas of India and offering basic financial services.

We wanted to support that development both from a philanthropic perspective, but also just because this has all the hallmarks of potentially a great business. And our first major foray into micro finance was a disaster. It wound up being a complete zero. It was us trying our hand at a private company, we were new to India as well, we got several things wrong and it was a total write off. But I think part of the way that Legatum is put together is we invest on the basis of our beliefs, we invest with a posture of hope and we learn and we try to apply what we learn, whether it's good or bad.

And so in that case, we took that institutional knowledge that we had built up from what looked like a failure and applied it later. And several years later, we wound up helping recapitalize a company called SKS, which was the number one and a publicly listed microfinance company. And that stock went up 4X from our investment and we wound up making back all of our money and more, and it was a great end of the story. But the key pivot point was a commitment to the space, but also a commitment just to applying what we've learned.

Rachel Pether:
That's fabulous. And I think we've discussed before about how you invest on the basis of your beliefs, not your fears, which is obviously an excellent investment thesis. But I want to go a bit further into what you were talking about, these big ideas made simple, and I know that philanthropy is an area of importance for you personally and for the firm. Can you tell me more about some of the work that you've done here?

Mark Stoleson:
Yeah, sure. So just going back to our mission statement, and you said it very well, it is to generate and allocate the capital and ideas that can help others prosper. So to express that mission, we've got to do two things really well. First, we've got to generate capital, we've got to run a world-class investment organisation, and we're super blessed to have a world class team and a group of people that's been together for a long time. And when we stick to our knitting and operate within our core competencies, we can do that well. If we generate excess capital, how can we use it to help others prosper? And over the last 15 years, we've done that in a lot of different ways. And just like in our investment activities, we've learned a lot of things the hard way, but some things have really fired and have done really well.

An example of a simple big idea is our work in global deworming. One of my partners, Alan McCormick, it's a story that's become lore at Legatum. He was reading an article in the FT. It said that 1.5 billion people have intestinal worms and that the medicine is free or almost free, and you just basically have a logistical supply chain management problem, but that this is a solvable problem. It's cost 50 cents per person to treat them. So doing some quick math we thought, "That's a solvable problem, that's a problem that could be solved in our lifetimes. Let's go for it." And that started us off on a 10 year plus Odyssey that started with Burundi and Rwanda. We allocated about $10 million, did a seven year project and saw the disease prevalence in those two countries come down radically.

So these worms, they're not just small things. These are major neglected, tropical diseases. They can kill you, they can make you lame, they can make you blind, and they're only in the poorest communities on the planet. And so we felt like we can make an outsized difference, an outsized return on investment in that space. They're called neglected tropical diseases because they're neglected. People don't think about them. Because in Western economies, worms are not an issue anymore. You just don't find them in New Zealand or in Switzerland or in the US. So we tackled that problem.

And what I love about this story is not only did we see amazing success in that first 7 to 10 years in Rwanda and Burundi, but once we had the case study and the data that showed that it worked, we thought, "Well, we need to scale this, so how can we bring in more partners?" And we took our name off of it and worked with just a small group of other co-founders, and we launched what's called the END Fund, ending neglected diseases. And it started small, but today, or as of today, it's issued more than a billion dollars worth of medicine. It's treated over 900 million people. And this year is amazing, in 2020 with all of the restrictions and lockdowns and challenges, we're on track to treat a hundred million people in 2020.

Rachel Pether:
Wow. That's an incredibly impressive statistic. And I know that when we were speaking just earlier, we did notice that you do in fact have a sample of some of them behind you in the bookshelf that have been very, very well traveled.

Mark Stoleson:
And I assure to you that that wasn't put there as a prop, it actually does reside here in our library, here at work. So we're 100% back in the office here in Dubai and that jar of worms, it's obviously not pretty, but it's very effective at helping people understand these things exist. And this is what it can look like inside of a child's belly, and it can do a lot of damage. And so the CEO of the End Fund, Ellen Agler was invited to be one of the only outside speakers at a Gates Foundation all staff meeting, and she brought that jar of worms. And so for us, it's very meaningful, it's well-traveled, but it reminds us that we're not just working on statistics or big numbers, but every life is supremely valuable and we want to tackle these types of problems.

Rachel Pether:
And so when a lot of people... It's almost like CSR and ESG are almost becoming catch phrases nowadays, and many companies have CSR manuals that sit gathering dust. When you look at companies to invest in, is the sort of impact piece or the CSR piece, is that important to you as an investor as well?

Mark Stoleson:
So it's not important to us and I'll tell you why. It may be important to that company, and we don't begrudge what those companies are trying to do or their motives, but from a Legatum perspective, given that our mission is to generate capital, and then for us to use that capital to express our mission, to help others prosper, we want as much capital as possible returned to us so that we can control how that money is used to express our mission. We kind of feel like if the company keeps some of the shareholder returns that should be returned to us, and they use it, and they're expressing a totally different mission, we would rather have the money and use it for things that we verified, that we trust and that we have confidence in, and that's a better use of capital.

And maybe we have a little differentiated view, but when we look at someone like Bill Gates, for example, and Microsoft, I'm grateful to Bill Gates, we use his operating system. In my opinion, he's changed the world for the better. We all use this to communicate and to connect, to do business and work from home, and so we should be grateful to Bill Gates for Microsoft and these operating systems. If that's all he did, that would be super noble and just super admirable.

But the fact that he then did that and then started the Bill and Melinda Gates Foundation and takes capital and does more good, to me it's not giving back, you shouldn't operate out of guilt or out of a sense of duty, that's like giving again. He's already given the world something great and he's giving the world something great again. And I like that paradigm, and Legatum likes that paradigm too where giving should be cheerful, giving should be joyful, not out of a sense of guilt or some heavy duty. And that's kind of the spirit that we have at Legatum that we try to express with all of our partners in the field.

Rachel Pether:
That's fabulous. And I guess that leads to another question. And when you're looking at your philanthropic vehicles and I know you have a number of them, so I would like to talk about some of the others as well. How do you measure success then? Or is it, you don't use these quantitative metrics because that is separate from the investment side of the business. How do you look at that in terms of success with the philanthropic vehicles?

Mark Stoleson:
Well, it's difficult. I mean, it's a real challenge. If you're going to give away money well and do no harm is your first obligation, you have to be serious about measuring what it is that you're doing. Aristotle said that 'it's harder to give money away than make it'. And we think that that's actually true because you're in the business of intervening in people's lives and that should be handled with great care. And so I would answer in that we do our very, very best, and we give it a lot of attention. With something like the End Fund and really across the board and all of our philanthropic activities, we're not asking the question of how much money is required, or how much money have we given. That's a crude metric, and it's a metric that the world uses.

Our question is much more of an investment mindset. What's the return on investment? Running Legatum as an investment organisation, if I sat here and told you, "This is how much money we invested." You would say, "Well, that's great, but what were your returns like?" It should be the same question in the philanthropic space. And so that's kind of the mindset with which we approach everything that we do philanthropically. So with the END Fund or the Freedom Fund, or the other things that you mentioned, where we infuse into the organisations and work with the leadership and the board, just to make sure that we establish baselines right at the very beginning of any project and understand where we're starting from and then do our best to track the progress so that we've got great numbers that have integrity, and that can give us good feedback mechanisms so we can make adjustments to get the highest return on investment.

Rachel Pether:
You mentioned the Freedom Fund again. We've actually already had quite a few questions coming in from the audience which I do want to address. But before I move on to those questions, tell me a bit more about the Freedom Fund and how that's one of the big ideas made simple.

Mark Stoleson:
Okay. So the Freedom Fund from a Legatum perspective was doing two things at the outset. One was Legatum had a long history, and really that predated even my arrival here in fighting modern day slavery, human trafficking and slavery all over the world, including in South America and Eastern Europe, Western Africa. We looked at this issue and felt like the latest data coming out of the US and government agencies is that you've got 30 to 40 million slaves in the world. And given the ethos of Legatum and the primacy that we placed just on freedom, just on on the sanctity of the individual and freedom, we felt like that's just a scourge and an evil that has got to be addressed. And the manner in which we're going to address it is to be targeted and focused and take that long-term approach.

What we did with the Freedom Fund was took a page out of our playbook from the END Fund and said, "How can we collaborate with other philanthropists and pool our capital and pool our resources and our experience, and really make a serious push here." So we joined forces with an organisation called Walk Free and another one called Humanity United, and together with Legatum, the three of us launched the Freedom Fund. And the goal of the Freedom Fund is to work with frontline organisations. So instead of the top-down approach of saying, "We know how to deal with issues of slavery." We're coming alongside in partnership and supporting those who are already doing it on the front lines, in their communities, who speak the language, who understand the culture, and that have a passion for this work. And instead of scatter-gunning around the world in lots of small projects, we focused all of our efforts in the South Asian corridor, where you see a high prevalence of slavery and trafficking, and it felt like, "Let's make a big dent there." And that's what we've done.

The Freedom Fund has been directly involved in liberating nearly 30,000 people from slavery and their education programs and rehabilitation and, and awareness programs have touched over nearly 700,000 people. And we feel like we're just getting going, that's, that's something that we won't stop doing until we're gone, or until that ends. And so we have amazing partners in Humanity United and Walk Free that are in it for the long-term as well.

Rachel Pether:
And so how do you define slavery, modern day slavery?

Mark Stoleson:
I think there are probably different definitions out there, but our definition is people who have lost their freedom and are being exploited for profit. Again, there are different opinions, but when we look at it on a very fundamental basis, on a simple basis, anyone who's been deprived of their freedom of movement and their ability to express their individual life as they see fit, can fall into that category. But very specifically, when you see people in forced labor or child labor, or the issue of brothels in some countries, you don't need a definition and you don't need a PhD. You know it's slavery, you know it's bondage, you know it's wrong. And so that's what we're going after.

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