What Makes America Great?

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Newsroom Clip

Open with newsroom clip from 2012: https://www.youtube.com/watch?v=fJh9t9h6Wn0

What's missing from this clip is the thing that makes America truly exceptional: capital markets and the right to innovate.

  • most people will watch this clip, generally agree with the criticism, and not realize the omission of capital markets and innovation.

Include stats about US venture capital investment and innovation:

  • comparison by country
  • number of unicorns, exits, amount of capital raised, dollars of public market cap created, attributed returns in S&P
  • Market cap of venture backed tech companies likely exceeds most countries' GDPs
  • America was founded by venture capital from Columbus to colonies and early industries like whaling, oil, and railroads

This is the one area that America truly blows the rest of the world out of the water. It's also something that most Americans totally do not understand, even (or maybe especially) those who have fancy liberal artsdegrees from elite universities, PHDs, or decades of experience working in the public or private sector.

Most people will watch that clip and generally agree with all the criticism. Being anti-america has become "cool" lately, but like many trending ideas, there's not always a lot of critical analysis and first principles thinking.

Include clip from Ferris Bueller's Day Off: https://www.youtube.com/watch?v=uhiCFdWeQfA most people, when they hear "venture capital" it triggers an association with a dry economics professor writing on a chalkboard. Or more likely, it's a word they've heard but like Tim Walz https://www.youtube.com/watch?v=UCnAseKCJb8 they just don't really know what it means. Popular culture references like Silicon Valley's Peter Gregory, or Masa from We Crashed might also come to mind. Those more in tech circles might think of VC brags or Jason Calacanis telling everyone for the 10,000th time that he was the first investor in Uber.

Capitalist has become a dirty word in recent years with the rise of the reductive tax-the-rich and anti-billionaire memes championed by the likes of Bernie Sanders and Alexandria Ocasio-Cortez. insert tax the rich dress, so it's easy enough to just hear "capital" and think "bad". If you were to poll a group of 10,000 political science majors, on this topic, I expect maybe 10% would provide more reasoning than the association I just described. You might get a handful more buzzwords, but that's about it.

How does Innovation Work?

Founders and early employees take a huge risk to solve a valuable problem. They risk years of their time, forgone salary, capital investment, reputation, and more. Most fail. But the unside is uncapped. Founders get investment from VCs, who invest in dozens or 100s of companies. Again, most fail, but those that hit typically yield the returns for the entire fund to beat the s&p typically returning 30% per year. Founders and early employees get rich when 1) the company is acquired, 2) the company goes public – an exit. VCs also get their returns from exits. Secondary markets often exist (as an aside).

Where does the money come from?

Pensions, endowments, sovereign wealth funds, family offices, and more. Yes, pensions. Meaning that the money comes from the money that the average American worker has saved for retirement. Part of the weath of millions of Americans fuels the engine of innovation.

Where does Wealth Come From?

Misconceptions about wealth being zero sum. Mention Peter Theil's writing in zero to one. Billionaires, and equity. Startups create tons of wealth for employees as well as founders.

Criticism of billionaires is a red herring. Billionaires are the result of a system that works. Having unbounded upside for those that take big risks and succeed is a key feature, rather than a bug of the system. Compare to athletes and artists. Those that perform on the far right fail of the bell curve of talent deserve the wealth they have earned.

Why is Innovation Important?

Moderna

Zooming out

Show chart of cost of goods in various industries over the last 100 years. Include a few examples like cars, computers, housing, healthcare, education. Link to Bill Gurley's post on regulatory capture.

Comparing America to the Rest of the World

Consider the regulations in [insert EU company with insane startup rules (germany making the notary read the entire series A document outloud), Levelsio

Criticisms

YC hackernews post about carnival https://x.com/sahilypatel/status/1884640249995039084
  • necessity breeds innovation
  • Going all-in means you have skin in the game
  • Plenty of success stories (provide many)

Accreditation rules. Only accredited investors are allowed to invest in private companies. Frankly to me it seems like this law was put in place under the assumption that the avg American is too stupid. They likely are, but if we allow people to invest in fartcoin, they should be able to buy an index of every company in a YC batch. VCs like Jason Calacanis have been pushing for this for years.

Again, the answer to this problem is – deregulation. Sounds familiar?

I have yet to heard a real argument against this system. Most I have heard boil down to a lack of understanding. I would love someone to prove me wrong.