Why America Remains the Global Engine of Innovation

Originally published in LibetyThroughWealth.com on September 14, 2021

A bungled and shameful withdrawal from Afghanistan… A nation divided by deeply conflicting political visions… An economy hobbled by a virus that likely originated from its greatest geopolitical rival…

America’s standing in the world hasn’t stumbled this much since the late 1960s.

New York Times columnist Thomas Friedman summarized it well when he wrote the following…

The results of America’s culture speak for themselves. American companies have an unrivaled impact on the rest of the world.

Billions of people use Google and Facebook every day. (There are more Facebook users on the planet than there are Christians.)

Close to 175 million Netflix subscribers stream a bit of America into their lives each night.

And it’s this “soft power” of innovation — not military might — that is America’s greatest weapon.

Let’s take a closer look at the five factors — extreme freedom of thought, steady immigration of new minds, a risk-taking culture, a noncorrupt bureaucracy, and our financial markets and venture capital system — Friedman says are behind America’s success.

Whether it’s the colonists defeating the British in the Revolutionary War… or adventurous migrants settling the Wild West… or Steve Jobs aspiring to make “a dent in the universe” with the iPhone… the ideology of heroes who challenge the system and succeed by forging their own path is deeply ingrained in American culture.

In contrast, the U.K. education system shoehorns kids into a course of study at a young age. Asian cultures prioritize rote learning above all else.

I hear this from the kids I interview each year when they apply to study in the U.S. The world’s most talented teenagers want to study in a country that will allow them to pursue what they wish, to forge their own paths and to shape their own realities.

The U.S. attracts millions of people from all over the world who are seeking a better life, including undocumented immigrants from Latin America and refugees fleeing war-torn countries.

Some would argue that unauthorized immigrants take American jobs, undermine public safety and strain community resources.

But what’s worse for a country’s long-term prospects? No immigration at all.

Just consider America’s two greatest rivals of the past generation: Japan and China.

What do these countries have in common? Neither welcome immigrants.

The U.S. could not be more different. Consider that the current CEOs of Microsoft, Adobe and Mastercard all went to the same high school — in India.

Their openness and creative thought would be unacceptable in Japan or China. World-class talent rarely chooses to emigrate to these Asian giants.

British economist John Maynard Keynes once said, “It is better to fail conventionally than succeed unconventionally.” This quote epitomizes the difference between the U.S. and the rest of the world.

And they may start in Europe, but they later migrate to the U.S. Consider Shazam, the music recognition app, for example. Although it launched in London, it opened an office in Silicon Valley once it hit critical mass.

Soon after, in 2018, Apple acquired Shazam — which is now located right down the road from Apple’s headquarters.

Americans love to rail against unjust elections and burdensome government and bureaucracy. And yes, states like New York and California are a miasma of regulation.

No wonder the likes of Oracle and Tesla are voting with their feet, abandoning California in favor of Texas.

A college classmate of mine once managed 200 programmers in Bangalore, India, for a Silicon Valley-based company. He told me after he returned to the U.S., “Imagine the worst corruption you possibly can. Now multiply it by 100. That’s how bad it was.”

Clearly, environment matters. Add to that the unique financial infrastructure that allows companies to grow and thrive here in the U.S.

The lesson?

If you’re talented and grow up in Estonia, you can invent a service like Skype. But to turn it into a global business, you need to end up in the U.S. Only then will the likes of Microsoft acquire you.

How do these insights about the advantages of American culture apply to investing?

As Warren Buffett observed in 2016, “For 240 years, it’s been a terrible mistake to bet against America, and now is no time to start.”

That’s excellent advice.

Rest assured that the next Google is not coming out of Brazil.

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