It pays to be first

Founder of Batterymarch Financial Management in 1969, LeBaron, 76, lives in Newbury. He is one of the inventors of index funds, a pioneer of quantitative investing and computerized trading, and one of the first institutional investors in the then-emerging markets and agriculture. Demonstrating his philosophy that, in the investment field, you should be where everyone else is not, he was an early, and sometimes first, institutional investor in the emerging markets of Argentina, Brazil, Chile, China, India, Indonesia and Russia, and was invited by the Gorbachev government to help privatize the Soviet military industrial complex.

How important is it to be first?

I'd say it's better to be first than to be absolutely right, and I was usually first. I invested in countries before they had commercial airlines. I kept three airplanes going for 15 years. The largest plane, a Gulfstream II with tip tanks, was a fully equipped quantitative investment office. I had pajamas, everything I needed, in the plane. There wasn't much investment information available for those markets, and I made investment decisions on the spot.

For a time I invested in three Papua New Guinea plantations, and I'd visit each for a week or so, once a year. Well, New Guinea Air had only one 707, and service twice a week. To invest in Eastern Europe and Russia, I bought a second house near Zurich, which has a great airport, and I'd fly my Gulfstream over there all the time to see what to invest in. And when I got back, I'd ski. Well, I did the same thing in New Hampshire.

And you invested in China, correct?

I created the first Western investment fund in China. At the time, there were no Chinese investment funds in China, so mine was the first.

By the way, my Chinese contacts visited New Hampshire, too. They wanted to see real people. I told them to go to Bradford Junction, the Blackwater Junction Restaurant, and any church supper. And they did. They liked New Hampshire very much. One who came was Lou Jiwei, at the time head of the Shanghai Municipal Office for Economic Reform. Well, he is now chairman of the China Investment Corp., China's sovereign wealth fund in charge of China's U.S. dollar balances, which is to say our trade deficit. Very important for us, now.

Geographically, the world is a smaller place than when you started investing. How do you work now? Do you still travel?

I travel much less but still work every day of the year, regardless of my location, and regardless of the time, thanks to the internet. I've always liked being online. I started e-mailing back in the early 1980s, when you had to use Fortran and Cobol to do it. E-mail is great because you have time control. The sender can send when inspiration strikes. And the receiver can read the message when he wants, and mull it over before he sends an answer. I've flown to Hong Kong for a bad lunch where neither of us can think of the right thing to say. That's a time-waster. Now, I say, do all your work electronically. No one knows where you are, and no one needs to.

Do you have any investment advice for the average person?

Successful investors incorporate their own personalities into how they invest and what they invest in. But you must have a consistent package.

For instance, are you a buy-and-hold investor? A short-term investor? A conservative investor? A speculator? And what interests you? What do you know about? And of course, think for yourself. That's the most important.

You are a fan of Peter Drucker, who said, "For new technology to replace old, it has to have at least 10 times the benefit." Where today will we see "10 times the benefit"?

I'll give you two examples. The first is clearly medicine. The delivery of medicine in the United States is backward and inefficient. At least 30 percent of what we spend on medicine is entirely wasted. The Dartmouth Initiative is studying this right now.

Medicine is structured around doctors. Doctors have designated themselves as the "consumers" of medicine, and the industry tries to please them. Well, General Motors made the same mistake. They thought their dealers were the consumers, rather than the people who drove the cars. The dealers of course wanted to sell high-margin vehicles. The drivers, the consumers, wanted something simpler and lower-cost. So GM lost market share to others.

What do consumers want in a health insurance provider? Something simpler, more accessible, lower-cost. Something where you can get a simple answer to a simple question, if that's what you want. There is a website called Just Answer (justanswer.com) where you have to pay for the information. If you like the answer, you pay from $9-$12. I paid $9 for the last bit of medical information I wanted.

Also, doctors should do much more with computers in their offices, by standardizing and sharing records. We have fear-of-privacy issues here that are largely unfounded. There's a patient-information program called The Patient Online at Dartmouth Hitchcock in Lebanon that is very good.

Publishing is another area where there is going to be a big change. Electronic publishing is going to be standard and we are going to consume books in a different way than we do now. Right now, we want paper books and we buy them, one at a time. When we have electronic books we will get what I call bundles . . .Ten at a time on the same subject, and have the ability to cross-reference and compare.

You can live and work anywhere in the world. Why New Hampshire?

I like New Hampshire. New Hampshire is comfortable. Many of the people who move to New Hampshire do so for lifestyle reasons. They are well-rounded.

The current economic situation seems to be very precarious. I have called you a guru. Can you predict our economic future?

The best prediction is no prediction. We will have to be flexible and not be committed to fixed ideas about the future. I would say, though, that we will have 10 to 15 years of trauma, followed by a new economic system that we create. We are writing new history here. But I can't make predictions - nobody should make predictions.

We may have new institutions, public/private partnerships. There may be subsidized employment in the United States. Our new economy may not be the strongest in the world. And our government may not function well, may not be the best in the world. In fact we may have a revolution. We must be ready to jump in whatever direction is needed.

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