Invest Like the Best with Patrick O'Shaughnessy
00:25:17 · Walter Russell Mead
So we said, okay, fine, Germany, you can have really high tariffs on American goods, but we won't reciprocate because it's in our interest for you to grow. A lot of that stuff got institutionalized, there are many many cases now where you have non reciprocal tariffs and our barriers have been lower, I think the Trump people were not wrong to say, okay, this needed to change. We're also seeing with the need for supply chain security and so on, you can't simply take your economic policy out of a free trade textbook.
00:25:52 · Patrick O'Shaughnessy
[00:25:52] S0: On the other hand, you do still need trade. Trade needs to be beneficial on both ends. I wanna talk about the changing orientation of us versus the world, sort of our foreign policy. But first ask about technology because when I started my career, I'm 41, so twenty years ago, call it. I remember seeing, I've always been an investor. If you looked at the top 10 or 20 market cap companies, it was a total global mix of companies from many different industries. It looked like this kind of potpourri list. Now that same list is literally just American technology companies. Basically one through 20. There's a couple exceptions. It's more or less total dominance by American technology companies. And that was true before OpenAI and Anthropic and SpaceX. Now those are resurging even on top of our great technology companies. And I'd love to just hear you reflect on how tech, of course AI, and you have to ask about that as well, are changing the nature of global order in such a digitally dominant set of technologies that we're once again the leader in. How do you process it?
00:26:51 · Walter Russell Mead
[00:26:51] S2: I do try to look to historical analogies. There's nothing exactly the same as this. The closest you really can see is to the actual industrial revolution. Interestingly, the country that led the first industrial revolution, Britain then dominated for one hundred and fifty years became a dominant power. History is moving a lot faster now, but I think we absolutely have been in this position of the first to really see and use this potential source of power. I think since the seventeenth century, the key to power in the modern world is which countries can be most effective at developing, harnessing, exploiting the power of new technology without blowing up internally because of the social stress and upheavals that new technology causes. And for a lot of reasons, think first the British and then we were just better at riding that wild horse than other people were. I think that is still true, but you can look at American society today and see the reaction against tech, this sort of anti data center thing, and you've got Trotskyites in the DSA thinking that the most retrograde forms of Marxism are our only salvation in this terrible situation. It's not a given that we will be able to pull it off again. Enormous progress and yet total chaos and dissension. The relationship between achievement and order right now has broken down because we need a different kind of order than we've had because our technology has created a new kind of world. It is changing the way power works, it is changing the nature of power. So far, America is doing what we've been doing for a very long time, which is dominating the cutting edge.
00:28:48 · Patrick O'Shaughnessy, Walter Russell Mead
[00:28:48] S0: So we've developed it. We have the horse. What's the key to riding the wild horse? Because I think everyone in America would say, yeah, hope the next one hundred and fifty years we dominate. And it's because [00:28:59] S2: But in a nice way. That's the kind of people we are. [00:29:02] S0: How would you have us do that? What are the keys to doing that? Well, now that we have the horse.
00:29:07 · Walter Russell Mead
[00:29:07] S2: America's always been an ownership society. Why did a lot of the founders think that The United States could survive as a reasonably democratic republic? And one of the big answers was, instead of being a country of people who lived in cities and basically owned nothing and worked for other people, America was by and large a country of independent farmers who were kind of small business people and who owned their own land, had a stake in the system, and their life experience as an owner teaches them citizenship. So, boy, I really would love to see a new bridge over the stream here. On the other hand, if they build that, they're going to have to raise my taxes. You know, I then calculate in a rational way what I would like to happen, and that is the kind of political education that prepares me to take a thoughtful role in the councils of the country, plus I'm independent. And then with the industrial revolution, can this continue? We're getting the big cities, we're getting industry. Well the first stage we do with the railroads and the Homestead Act, they kind of come in together. The government gives a ton of land in often somewhat corrupt ways to railroads to build transcontinental railroads that turn the country into a national market, but then also gives free land to the American farmer. You go live on your farm for five years and it's yours. Amazing. For the ordinary person, alright, I'm getting a free farm out of the system and I'm a farmer and yet you're doing this in a way that is simultaneously allowing the infrastructure of a new industrial society to take place. Again in the twentieth century, think about how as the family farm begins to decay economically, it can't compete, you have to be very well capitalized to farm under modern conditions and so on. And where people are starting to work in cities and be employees, is this going to endanger the republic? Are we still going to be a free society of free people? Essentially we came up with the idea of the single family home in the suburbs to replace the single family farm.
00:31:27 · Walter Russell Mead, Patrick O'Shaughnessy
A lot of government policy was around, think about not only building the freeways and the highways, but subsidies to the tax code so that municipal bonds are tax free, which means towns can build the infrastructure that you need to attract the developers and the homeowners who will then raise the value of the property and so you can repay the bonds out of the higher property values that the infrastructure has created. So this kind of wealth creating machine. Well, now we seem to be in a place where we're reaching the limits of that wealth creating machine because it's just too expensive for the average person to buy a house and land close enough to where you work so that the commute isn't killing you. You look at why are so many young people really unhappy with the way the economy is working, home ownership is one of the real big problems. IT can kind of address this between remote work and hybrid work and self driving cars. If you only have to go into work once or twice a week or twice a month or whatever, you can work farther out. If you expand the commuting radius, say from 40 miles to 75 miles, the amount of land that is developable for housing goes up with the square of the radius, it's geometric. So you can open information technology appropriately deployed can open up for another two generations this wealth creating machine. [00:32:59] S0: Is there something equivalent to Homestead or the subsidy of homes that could drive this expansion? It seems like a really, really important thing to get right for America.