The Sunday Drive - 07/07/2024 Edition [#118]
Musings and Meanderings of a Financial Provocateur
👋🏼 Hello friends,
Greetings from Ellicottville, NY. Happy Fourth of July Weekend! Let’s enjoy a leisurely Sunday Drive around the Internet.
🎶 Vibin'
This is the 118th edition of the Sunday Drive and it marks the first time there’s been a repeat of the Vibe of the Week. As with last year’s Fourth of July edition, I’m again vibin’ to the legendary artist, Whitney Houston (RIP) and her performance of the Star Spangled Banner at the 1991 Super Bowl.
It is the most beautiful rendition of our National Anthem that I’ve ever heard, and is likely going to be an annual tradition for the Sunday Drive each July 4th going forward. 🇺🇸
💭 Quote of the Week
“GDP is a proxy for humanity’s success in fighting the unflagging foe that is poverty.”
— Packy McCormick (H/T to Noah Smith)
📈 Chart of the Week
Source: Not Boring by Packy McCormick
This week’s Chart is drawn from an outstanding essay by Packy McCormick, a writer and thinker for whom I have great respect. The piece is called The American Millennium - A Fourth of July Tribute to a Nation on the Rise.
I’ll be quoting extensively from it this week, partly because it echoes much about how I feel about our country, and also because Packy is a far better writer than I could ever hope to be. I would encourage you to read the whole piece.
This quote is one that stood out to me:
Despite leadership that almost no one is happy with, America is humming.
How could that be?
America as a Vector Sum of Government and Entrepreneurial Forces
My hypothesis is that technology compounds more quickly than the government ossifies, and that entrepreneurship in a broad sense has overtaken institutions as the prime mover of American exceptionalism.
One (very oversimplified) way to think of progress is as a vector sum of government and entrepreneurial forces.
A vector is a quantity that has both a magnitude and a direction, like velocity (speed in a specific direction) or force (strength applied in a particular direction). You can think about it like an arrow of a certain length (magnitude) pointing a certain way (direction). A vector sum is what you get when you add the vectors up.
Government and entrepreneurship can pull in various directions at various strengths. When they’re both pulling in the same direction - up and to the right - progress happens more quickly. But even if the government stagnates, a strong entrepreneurial ecosystem can pull progress ahead on its own.
The strength of America’s entrepreneurial spirit has driven significant growth over our history, despite the government (at times) being an impediment to that growth.
This week’s Chart shows that over the last four decades, trust in government has declined, more or less, in a straight line with the exception of the prosperous late 1990’s period. Think back to President Bill Clinton’s famous line, “The era of big government is over.”
Whether or not you think that was indeed true - at least for a while - enough folks did believe it was true that there was a palpable sense at the time that government was a tailwind for economic growth, or at least not a headwind.
Couple that with what was arguably one of the greatest periods of entrepreneurial innovation in our country’s history, and we had a near decade long period of strong growth and overall prosperity.
One of the reasons I tend to focus so much on Artificial Intelligence (AI) and its investment implications in the Sunday Drive is that I believe we stand at the door of another period of significant entrepreneurial progress. The animal spirits of AI are certainly obvious to see.
The question is, in keeping with Packy’s framework of the Vector Sum of Entrepreneurship and Government, will our government be a headwind in the face of that progress, and if so, will it be a strong or a weak one?
My personal opinion is that we will not get the answer to that question in 2024, but rather in 2028. This is the election where I believe a younger cohort of politicians will truly begin to come into power and effect significant change.
Below is another section of Packy’s piece that I thought was worth mentioning:
Antifragility Through Entrepreneurship
One of the beautiful things about America is that broken things present opportunities, and the solutions that survive the capitalist gauntlet are better than anything any government could come up with alone.
America’s electric grid is crumbling? It’s impossible to build big things like transmission lines cheap and fast? Cool. Base Power Company can profit off the volatility by storing power when it’s cheap and dispatching it when it’s expensive, and balance the grid in the process.
America has a housing shortage? We’re nowhere near on pace to build the more than 6 million new houses we’ll need by 2030, slowed by zoning, regulation, and skilled labor shortages? No problem. Cuby is building “Mobile Micro-Factories that manufacture and assemble homes for the masses,” turning home construction into a manufacturing and assembly process that can use unskilled laborers to build higher-quality houses faster and at a lower price per square foot than traditional home builders can.
We can’t manufacture like we could? The manufacturing labor force is aging out? Fine. Hadrian is building semi-automated factories that put more young Americans to work. Formic is helping existing factories automate with robots. And a wave of robotics companies is pushing to provide the American industrial base with plug-in labor, on-demand.
These are just a few examples of the entrepreneurial spirit exhibiting its strength in the physical parts of our society.
Most of the start-ups we hear about are in the digital world - the silicon realm if you will.
But I would argue that our greatest areas of need and opportunity are in the physical world - the carbon realm if you will. Beyond just the energy, housing, and manufacturing sectors mentioned above, there are opportunities in healthcare, education, climate improvement, among others that are also ripe for opportunity and innovation.
One last quote from Packy:
“No one is coming to save us. We can just build things.”
🚙 Interesting Drive-By's
📈 The Little Tech Agenda - from Marc Andreeson and Ben Horowitz [Link]
🤔 The Elemental Foe - from Noah Smith [Link]
💡 How to Become an Expert at With AI - from Michael Taylor [Link]
💰 The S&P 500 as a VC Fund - from Liberty RPF [Link]
📉 Nvdia’s CEO gave us the Bear Case. No one is listening. - also from Liberty RPF [Link]
👋🏼 Parting Thought
Note: Make sure to unmute 🔇
If you have any cool articles or ideas that might be interesting for future Sunday Drive-by's, please send them along or tweet 'em (X ‘em?) at me.
Please note that the content in The Sunday Drive is intended for informational purposes only, and is in no way intended to be financial, legal, tax, marital, or even cooking advice. Consult your own professionals as needed. The views expressed in The Sunday Drive are mine alone, and are not necessarily the views of Investment Research Partners or Cache Financials.
I hope you have a relaxing weekend and a great week ahead. See you next Sunday...
Your faithful financial provocateur,
-Mike
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