Symptoms of a Sick State
What the hell happened to the dynamic American economy?
Figure 1 - Artistic depiction of a sick America (created with Dall-E-2)
Nearly three years ago, Marc Andreessen—creator of Mosaic, founder of Netscape, and founding partner of Venture Capital behemoth Andreessen Horowitz—released a blog post titled “It’s Time to Build.” His post seemingly ignited a renewed emphasis across venture capitalists and technologists to provide for the American interest. In the post, Andreessen identified his own symptoms of American decline: smug complacency, satisfaction with the status quo, housing shortages and ridiculous prices, educational stagnation, outsourced manufacturing, and aging transportation and infrastructure.
We can trace the origin of these symptoms back almost thirty years ago to the late 1980s / early 1990s. And as Andreessen identifies, the risk of inaction related to addressing the underlying sicknesses is massive.
American Dynamism in Peril
In 2014, the Economist ran a single graph accompanying a short paragraph under the title “American dynamism dimmed.” While this contribution went largely unnoticed at the time, it would serve as the first notice of this decay that would prove significant.
Two years later, Derek Thompson wrote “How America Lost its Mojo,” in The Atlantic, accelerating the conversation. Of course, the conversation died quickly the following year after the Oracle of Omaha, Warren Buffett, reassured us of the vibrancy and dynamism of the American economy.
Several years later, and just before the global pandemic reached America, the conversation about American dynamism picked up again. NPR ran a segment in January of 2020 with Cardiff Garcia and Darius Rafieyan called “American Dynamism in Decline.” In this piece, they looked at three indicators of dynamism including the percentage of startups in the economy (declined 28% from 1994 to 2019), the percentage of employees that switch jobs over the past year (declined 15% between 1994 and 2019), and the number of interstate moves in the past year (declined by 33% from 1994 to 2017).
[Personally, I find the decline in job switching to be the most interesting as it runs counter to prevailing narratives that millennials are perennial job hoppers, disloyal, or otherwise unserious about work.]
Figure 2 - US Census data showing decline in new companies entering the economy
Figure 3 - US Census data showing decline in percentage of workers that change jobs
Figure 4 - US Census data showing drop in people moving across state boundaries
A month later, Ross Douthat released his book The Decadent Society: How we Became Victims of our own Success. A couple of months later, as many Americans experienced full lock-down, Andreessen released his seminal blog post. This lock-down represented the first major awakening for many of us that something was deeply wrong in our country.
Relative Advantage
Despite these declines in American Dynamism, Warren Buffett wasn’t entirely wrong; America remains the strongest and largest economy in the world. The World Bank reports that in 2021, the United States GDP remained 131% of China’s. The International Monetary Fund’s Economic Outlook database projects that even in 2027, the United States economy will remain 115% the size of China’s.
So with this optimistic outlook, I can understand why some of us may ask “so what?” Why do we care about American Dynamism? Why can’t we accept the status quo as “good enough?” Why should we build and produce?
In future editions of this newsletter, we’ll continue to explore why we cannot accept settling for “good enough” and why we must invest in America, before it’s too late.