Tuesday, January 5

Was America’s Economic Prosperity Just a Historical Accident?

Now here's something that both you and I will face son. I've got about 50% of my life left. You have about 80-85% of your life left. You will most probably see in the next century. I'll be with you till about 2050 or so. 

What kind of society will we be living in? Where will be the jobs? Where is the money? Which country will be safe to work and raise your children? 

In particular son, two questions for you. What kind of job or work should you do? And what kind of financial security should you aim for? You are already saving and investing in blue chip companies so that's very good. One thing which you need to start thinking about is to be an entrepreneur and generate money. That is a good thing to do. You already have the skills and will be a good aspect to pick up. 

Jobs are plenty but high paying intellectual roles are going to be rarer and rarer. Competition higher and higher. Disruption more and more. 

I do agree that the growth rates are going to be depressed for many years if not at least 2 decades at least. Why? Because that's how long it will take to get the debt problem under control at a minimum. Our population productivity sucks. Supply of most inputs is constrained. The emerging markets and OECD countries have frankly bought as many fridges cars and smartphones. That's not going to move the dial that much. So growth will be constrained. 

So aim to get yourself where the driver is efficiency. Where you can make things at a lower cost. When revenues cannot grow then you go after productivity growth and cost reductions. 

Keep this in mind son. Take advantage of it. And keep an eye out on opportunities to make money and gain experience. Keep fighting son. 



Was America’s Economic Prosperity Just a Historical Accident?

Illustration by Mario Hugo  

Picture this, arranged along a time line. 

For all of measurable human history up until the year 1750, nothing happened that mattered. This isn’t to say history was stagnant, or that life was only grim and blank, but the well-being of average people did not perceptibly improve. All of the wars, literature, love affairs, and religious schisms, the schemes for empire-making and ocean-crossing and simple profit and freedom, the entire human theater of ambition and deceit and redemption took place on a scale too small to register, too minor to much improve the lot of ordinary human beings. In England before the middle of the eighteenth century, where industrialization first began, the pace of progress was so slow that it took 350 years for a family to double its standard of living. In Sweden, during a similar 200-year period, there was essentially no improvement at all. By the middle of the eighteenth century, the state of technology and the luxury and quality of life afforded the average individual were little better than they had been two millennia earlier, in ancient Rome.

Then two things happened that did matter, and they were so grand that they dwarfed everything that had come before and encompassed most everything that has come since: the first industrial revolution, beginning in 1750 or so in the north of England, and the second industrial revolution, beginning around 1870 and created mostly in this country. That the second industrial revolution happened just as the first had begun to dissipate was an incredible stroke of good luck. It meant that during the whole modern era from 1750 onward—which contains, not coincidentally, the full life span of the United States—human well-being accelerated at a rate that could barely have been contemplated before. Instead of permanent stagnation, growth became so rapid and so seemingly automatic that by the fifties and sixties the average American would roughly double his or her parents’ standard of living. In the space of a single generation, for most everybody, life was getting twice as good.

At some point in the late sixties or early seventies, this great acceleration began to taper off. The shift was modest at first, and it was concealed in the hectic up-and-down of yearly data. But if you examine the growth data since the early seventies, and if you are mathematically astute enough to fit a curve to it, you can see a clear trend: The rate at which life is improving here, on the frontier of human well-being, has slowed.

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