Jul 6, 2023

Team America

Chris Freiman is one of my favorite people on Twitter. He refers to himself as a “political philosopher” and is an incoming professor at West Virginia University. He tweeted this on the Fourth of July:

Master-level trolling.

I hadn’t looked at the per-capita GDP numbers in a while. I didn’t realize we’re so far ahead. We’re dominating… Luxembourg, finance enclave and tax haven. We’re 50% above Switzerland and the rest of Europe. I don’t think people realize what an incredibly high standard of living we enjoy in the United States.

Why?

How is the US different from Western Europe, Australia, and Japan? All are various incarnations of free-market economies. And in some ways, some very specific ways, European countries are even more free market than us. Sweden doesn’t have a minimum wage, for example.

So, what makes the United States different? It’s the culture.

Unlimited Upside

A Venezuelan expat explained this to me years ago—the US is one of a few places in the world where you can drive a Ferrari down the street, and someone won’t throw a rock at it. In fact, if you drive a Ferrari down the street in most places in the US (ex-San Francisco), people standing on the sidewalk will turn and say, “Cool!”

We have rich people here. But there are rich people everywhere. The crucial difference is that in the United States, we all can become rich—if we want to. That last part is crucial. The opportunity is there if you want to take advantage of it.

We are a nation of strivers and dreamers. It may not seem that way when you see the communists battling the Proud Boys on the streets of Portland, Oregon. But it absolutely is true. Not everyone thinks as big as Elon Musk, but the vast majority of people are out there fighting for an extra $10,000, $20,000, or $50,000.

In other parts of the world, nobody bothers. Partly because the downside has been truncated by the state, but partly because there is just no cultural precedent for it. In lots of Europe, social caste determines how much money you have, and there is absolutely no economic mobility.

If you look at the stats on economic mobility in the US, it hasn’t changed much over the years—people jump up and down tax brackets all the time. Everyone has an idea for a business. Not many of them work out, but people learn from their mistakes and try again, and it is this national process of entrepreneurial trial and error that makes America great.

In the United States, there is no limit to how successful you can be. If you start becoming successful in other countries, people look askance at you. You might remember Rene Redzepi, the Hungarian immigrant in Copenhagen who once ran the most successful restaurant in the world, Noma. Redzepi was a culinary genius—he even set up something resembling a chemistry lab where his chefs could experiment with new flavors. He was featured on an Anthony Bourdain episode, and Bourdain asked him what it was like living in Denmark. Not good, he said.

Danes don’t like people who stand out—the tall poppy syndrome—and living in Denmark was hell. He was public enemy number one—for being successful. Instead of being celebrated, he was reviled.

That is what it is like in most places in the world.

Migration

Opinions differ about what we should do about the flood of migrants coming across the Southern border. I can assure you that Chris Freiman would say that we should let them in.

Regardless of where you fall on the issue, you must admit that it is a good thing that people are trying to come here instead of leaving. I have never heard of someone trying to escape DeSantis on a raft to Cuba. Oh, people are leaving, all right. California. Over 400,000 of them left last year. Because the state was putting a limit on how successful one could be, among other things.

I think a pretty good sign that you are doing a bad job at governance is if 1% of your state’s population is leaving every year. For sure, there are a lot of super-wealthy people who haven’t left yet. At some point, you just have so much money, and you don’t even care.

I’ve seen a lot of articles in the last 10 years about how American exceptionalism is dead. Go ahead and look at that table at the top of this piece and tell me that American exceptionalism is dead. I personally haven’t seen any signs of it. In America, we have the freedom to succeed but also the freedom to fail. That last part is important because fear of failure is a powerful motivator.

A lot of people look at the outperformance of US versus European stocks over the last 15 years and scratch their heads. This should mean revert at some point, right? Well, what does America have that Europe doesn’t? Tech companies and, by extension, innovation. The rest of the world doesn’t have people toiling away, solving one problem after another, with the promise of riches at the end of the road.

You will know when American exceptionalism is dead. Not here, not now.

Jared Dillian, MFA

P.S. If you haven’t seen my latest interview with Mauldin Economics publisher Ed D’Agostino, I encourage you to check it out. We cover today’s market sentiment, whether or not we’re in a new bull market, and Fed policy. Plus, “de-risking” your portfolio and positioning yourself for the can’t-miss trade of the summer. To watch the video, click here. Or, if you prefer, you can read the transcript.

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