I can speak with some experience here, being a successful example of your target market:
1. WFH is amazing and fertility enhancing. One of the key problems with multiple kids is school pickups when you have a baby or toddler at home. The mom just doesn’t want to pack the little one and lug them about every day. Also so much better for lifestyle and happiness.
For those who don’t work from home, better school buses or maybe minibuses or shared cars would help. School buses theoretically exist but are so unreliable and routes are so long that they aren’t practical. You end up with traffic jams every day at school.
2. Encourage women to have artsy degrees that don’t pay off, so they don’t feel like mothering is a sacrifice. Then they can do some hobby job on the side, teach, etc for some cash.
3. Encourage DB pension plans with generous survivor options and inflation protection for spouses. If you have a younger spouse, you want to make sure she’s taken care of when you’re gone. Help with drug and benefit plans for family would help older guys retire and not have to keep working for the benefits.
4. Extra credit in government pension plans would be nice but not game changing. Government programs are for subsistence, but you want enough money in retirement for a nice lifestyle.
5. Help with recreation for larger families would be nice. Why not make museums, zoos and amusement parks free or subsidized for larger families? It wouldn’t be that expensive and would be lifestyle enhancing.
6. FYI my experience is that fertility concerns are a bit overblown and you can still have a few children if a woman is married in her late twenties. Also a man can help his issues with supplements, weight loss and care (boxers and no phones in pant pockets). But doctors don’t tell you this information. We also had advice from a geneticist that fertility and health risks really hit hard for a woman starting at 38, so consider that something of a cut off.
Another potential stick could be to treat any tax benefits or subsisidies as deferred loans that are only cleared upon remaining married until your last child turns 18 (this would of course be exempted in cases of infidelity or abuse).
I'm aware divorce isnt as much an issue for the upper classes, amending laws so that its higly disincentivized would encourage more men who arent in the upper class, but still conscientous enough to understand the drawbacks to get married. It would more so act to drag the bottom up than to bolster the top as people generally try to emulate the class(es) above them
Market it as an attempt to fight inequality, otherwise I don't think any of these ideas are practicable in a democracy.
If rich parents are having fewer children, and poor/middle class parents are having more, then this is likely to lead to significant inequality in the long run. Not only do fewer rich children benefit from the concentrated resources of two wealthy and intelligent parents when being raised, they receive an inheritance literally 2x larger than an equally wealthy family with 2 children.
Meanwhile middle class and poor parents are spreading their limited childrearing resources between (on average) more children. What inheritance they will leave (probably just a house), will be split among more beneficiaries, diluting generational wealth.
This is likely to lead to rent-seeking behavior among trust-fund kids, akin to medieval aristocracy, just without any of the of the social norms and obligations that at least kept medieval aristocratic overindulgence in check.
When someone gets rich off their own production, like Bezos, there's quite a bit of justification for allowing him to keep that wealth, as it is an encouragement to others to work hard, and develop companies that greatly increase quality of life for millions (billions?) of people. It's a weaker argument when we're talking about Rockefeller's great-great-grandkid that he never met or imagined would exist, and shares only a few percentage of his genes with. The original productive behavior has been divorced from the reward, which is only maintained at societies expense since the original inheritance was large enough that many generations of descendants could live at a high quality of life, without having to return much (if anything) to society.
In my view, low elite fertility (absent AGI or whatever) ends in a class of people who produce relatively little for society, but live off the excess production of their ancestors. While they may have higher IQ (on average) than the population at large, if their impulses aren't directed toward the benefit of society at large (as is the case under capitalism for both entrepreneurs and employees), they will just use their increased intelligence to prudently manage portfolios, operate covertly-political charitable organizations, and generally seek to maintain their wealth as best they can without directing their industry for the benefit of others. As capital becomes a higher proportion of production, this system will be easier to maintain.
Brand elite fertility intervention as an attempt to prevent a hereditary "landed-class" or "trust-fund" aristocracy, and there's likely to be a lot more support from the people who won't benefit from these interventions. Otherwise it's politically impossible in a democracy, as Joe Schmo thinks "how cum the harvard types get a free nanny, while im here struggling to pay for my kids skool?"
The ultimate justification for capitalism over other economic systems is epitomized in the Adam Smith quote:
"Every individual … neither intends to promote the public interest, nor knows how much he is promoting it. By directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention."
I am not sure this assumption holds true when the return on a large amount of capital is high enough to provide a high quality of life for an ever-concentrating number of descendants while still increasing in real terms overall.
1) How much of the gap between desired and realised births is actually down to fertility, though? Clearly some, and more for the highly educated for the reasons you outline above, but in my case the difference in number of kids I'd like to have (four) and the number I do (two) is driven by practical issues. Housing, lack of research into pre-eclampsia, childcare costs, and a culture that makes free range parenting of the kind I had getting up effectively illegal are the barriers here.
2) I agree with forumposter above that any realistic proposal here can't explicitly target elites, but something like "woman gets 10% income tax off permanently per child" might work.
3) How much of the great accomplishments of the children of the wealthy is simply driven by their ability and willingness to take risks? Can we set up our society to make that a palatable option for more people?
1) Yeah, it's really interesting, because people always say things like "housing and childcare costs," but then when governments make those things cheap or free for people, it doesn't actually move the fertility needle in aggregate.
On housing costs, Israel is an interesting counter-example. Israel is basically the sole developed country with >=2.5 TFR. It's also a lot more expensive housing wise than everywhere else!
It's fertility is culture driven. People think it's religious, but Israel averages ~27% attending weeklyreligious services, in line with the US. Religiosity is average compared to other EU countries, and less than Poland and Italy, each of which are ~1 tfr.
It’s not the ultra-orthodox, as even secular jews have ~2 tfr and traditional jews have ~2.6 tfr, with religious jews ~4 tfr and Haredi ~6.7 tfr. There's a great article on all these points here: https://www.morebirths.com/p/understanding-high-israeli-fertility
So I think that although a lot of people SAY housing and childcare costs, they're not the true objection in the aggregate, more or less, and that if you could move a needle, moving "average age at first birth" from 29-32, where it is now, back to 22, where it was in the 50's, would do a LOT.
2). Oh yeah, these are bonkers for America. Both sides would unite to cut them down, as each would have things to hate about every single one. But there are more politically functional places that might try them, like Singapore or Korea. I mean fertility collapse is THE problem that literally every developed country is facing, and it's an existential threat, pretty much any idea has a chance of being tried at some point in the future under those pressures and incentives.
3). This is a really great question - I've often personally wondered about how much "successful entrepreneurship" and risk-taking is skill-gated versus contingent on luck.
I also wonder about what measures you could take that would make more people open to risk taking like starting a business or doing an invention. Most places have decent bankruptcy laws, so you're not personally liable if things fail. Honestly, it seems the biggest opportunity cost is time - if you spend years trying to do or start something that fails, you don't get those hours back (although you build skills that will help you in whatever you do later).
What interventions do you think would move the needle there?
Of course, many countries have different entrepreneurship rates (with the US at ~16%, versus France / Germany at ~7%, Japan and Russia at ~5%, China and Taiwan and Israel at ~10%) , so if somebody like America is at the efficient frontier, then trying to increase risk taking in the gen pop will be largely waste, as well.
Going off-topic a bit, but specifically about point 3, it's worth noting that part of the problem is that the US economy does an excellent job providing very smart people with very high income careers that are relatively low-risk (and also, societally, rather low-impact). If all you care about is wealth, you're simply much better off getting a job at GS or McKinsey or, if you're really smart, one of the outperforming quant funds. Anecdotally, the smartest, most rational, and most financially ambitious people I know all went to quant funds.
The risk/reward ratio of a startup is actually pretty high, and familial pressures play a role. After I sold my startup, I worked at a nonprofit for about a year in their venture arm. One of our founders from a lower-class family made the point that her parents were utterly opposed to her startup: "you made literally ten times my salary at 50 when you were 22. Just do that forever! Why take the risk of a wipeout for _any_ upside?"
Now I run a VC (a traditional, for-profit one), and I'll tell you that almost every good founder I've come across is not _primarily_ motivated by money. Interestingly, the best ones tend to have been either quite wealthy or quite poor. The wealthy ones have all adopted some combination of "the incremental dollar just doesn't mean that much, and I'm bored at my corporate job, and if I actually can sell my startup for $1bn, then _that_ wealth increment matters" and "if it fails, I'll just go back to earning $500k/year at Google." The opportunity cost doesn't seem like a big deal; at least to those in tech, it's easy to get rehired. The formerly-poor ones tend to be even less worried: "eh, I made it just fine with nothing the first time around; if it all blows up, I'll just do that again."
That's a long way of saying that I don't think there are many purely economic levers society can pull to make people more willing to take risky bets like building a startup.¹ The only galaxy-brained-totally-unworkable-ridiculous idea would be to just set some arbitrary cap on corporate and investment fund compensation. This maybe isn't quite as dumb as it sounds; I don't think any employee is really worth more than maybe a couple million/year. The salaries that obviously stupid CEOs like John Stumpf ² or the parade of imbeciles at Boeing earn are clearly uncorrelated with their talent. Even if you listen to, say, Ed Bastian (Delta CEO), it's pretty clear that the guy is a pretty average collegiate-level intellect; he's making tens of millions/year because he had the political skills to scramble up the ladder, not because he's a visionary (hell, the guy spent hundreds of millions to put Viasat dishes on every plane AFTER STARLINK EXISTED).
It just doesn't take that much intellectual horsepower to run a business that's already been put into place and has market dominance. It would, of course, be impossible to implement; the history of wage and price controls is about as compelling as the history of Communism. But, if we're going with "impractical but thought-provoking", limiting the ability to create generational wealth by climbing the greasy pole of corporate politics probably would create more entrepreneurialism among ambitious smart people. There would probably be a lot of terrible unintended side-effects, too; I heartily do NOT endorse this!
¹Hell, we have QSBS, which _completely exempts_ your first $10mm of capital gains from basically ANY federal taxes whatsoever! For most people, even high-earners, $10mm is pretty life-changing. It might not be FU money, but it's pretty squarely in the "never need to work again _and_ still have a top 1%-er lifestyle" money zone.
²Bottom half of a mediocre high school; no-name college; first job as a repo man.
> If all you care about is wealth, you're simply much better off getting a job at GS or McKinsey or, if you're really smart, one of the outperforming quant funds. Anecdotally, the smartest, most rational, and most financially ambitious people I know all went to quant funds.
> That's a long way of saying that I don't think there are many purely economic levers society can pull to make people more willing to take risky bets like building a startup.
Agree on this, too, and your general assessment of a lot of existing startup talent doing it because their downsides are covered.
I think the bigger lever we can move is culture - as I try to point out in my startup post, doing a startup is *literally* "the best use of your powers along lines of excellence," and you're essentially 10-1000x-ing your overall positive impact on the world by choosing to do one versus working at a FAANG or Goldman.
But it's kind of hard to get that message out to the FAANG and finance crowd - risk aversion is real, and when you have a guaranteed $500k a year AND much easier work weeks, it's pretty tough to persuade somebody to give that up.
> limiting the ability to create generational wealth by climbing the greasy pole of corporate politics probably would create more entrepreneurialism among ambitious smart people.
Yeah, I like this idea for the fact it's bold and different, but I'd legitimately worry about cooling economic growth overall, or it being gamed or Goodhearted some other net destructive way depending on the implementation details. It sounds like you ultimately judge it similarly.
That said, in the similar space, I think there's definitely something to be said for either limiting the ability for industry spanning companies to acquire smaller ones, or to somehow hasten the competitive landscape and eventual death of larger companies in favor of smaller ones. Because right now, everything innovative in the last 20 years has been bought by a FAANG (first Microsoft, then GOOG and META) to prevent competition, and they're so dominant and have such tentacles in basically everything that they can keep doing that until some entirely orthogonal company wrecks them.
I think a more competitive landscape would probably be net positive overall, in other words. But the implementation is always the hardest part, because you know whatever you try to do will be lobbied hard and Goodhearted harder.
Oh that startup post is great (still doing the archive trawl). I'm going to send that everyone who asks me whether they should do a startup. Funny coincidence: you come up with a target EV of $1.5bn for it to be worthwhile for a founder, and that's almost the exact target value we use internally when deciding to invest. Given the failure rate at the seed stage, we have to underwrite every investment to that outcome to have a chance at 6x-ing the fund (20% IRR over a decade). It's shocking how many deals we see where the total wild-success-everything-goes-right upside is like a $50mm exit.
I was thinking to put something in my reply about culture, but it was getting crazy long as-is (and kind of off topic to the actual post). I actually do think that culture is probably the biggest reason why America leads the world in innovation; other developed countries just aren't even close. It's concerning that culture of innovation and exploration is definitely getting worse in an absolute sense: just look at the dramatic drop in geographic mobility https://www.census.gov/library/visualizations/time-series/demo/historic.html. I suspect that it might be inevitable---just like, to bring it back around a bit to your original post---fertility. There's just so much less of a spur to take risk when, if you're smart and ambitious, you can come out of the gates making $200k and go up from there.
On the bright side, though, we might just be in a particularly rough cultural time. The big wealth-generating startup innovation of the past two decades has been social media, and (unusually for a technology) most people believe that it's actually pretty terrible. At a minimum, I think it's hard to argue that the good outweighs the bad, and a lot of people genuinely believe that it's an unalloyed bad. Do any super-smart ambitious people really revere Mark Zuckerberg the way people revered Steve Jobs or even Bill Gates¹? I don't have empirical proof, but I suspect not.
(I also suspect that's a big reason that there are so many people to try to kill LLMs in the cradle: people in their 20s and 30s---nearly all political staffers---just haven't witnessed a technological boom that led to huge increases in their wellbeing. Contrast social media with, say, manufacturing after WW2 or the jet age or the PC revolution in the 80s or the web in the 90s.)
I suspect that I agree about FAANG acquisitions, which puts me in the minory of investors (and probably also outside the libertarian-ish audience here). I had an argument recently with some other investors who were celebrating Lina Khan's ouster (that's by far the majority view in venture), and while enabling consolidation does make high-value acquisitions in the near-term more likely, I think it's bad for innovation overall. Especially given that they're not especially well-run companies (Google in particular is a joke; it's like a sclerotic search-enabled petro-state). That said, overall corporate lifetimes have been falling forever (https://www.imd.org/research-knowledge/disruption/articles/why-you-will-probably-live-longer-than-most-big-companies/) and I wouldn't be at all surprised if superior LLMs end up greatly diminishing or killing Google by diluting their search results and outperforming their inhouse models (a great irony, of course, seeing as they invented the very technology behind these LLMs and were too incompetent to develop it into a useful product).
Contra my own view to some extent: I very much enjoyed this book, which does a good job countering Big Business = Bad narrative: https://www.amazon.com/Big-Beautiful-Debunking-Small-Business/dp/026203770X. That said, the author is mostly comparing big companies against traditional small businesses, not startups. Ultimately, I'm just not completely convinced that big tech really is crowding out good startups; I suspect suspect they are, but I'd only put my confidence around 60%. Tech is also changing incredibly quickly right now, which almost always benefits new entrants. It may just not matter all that much either way.
¹Yes there were haters, especially in open-source-land, but _The Road Ahead_ was a runaway bestseller in the 90s, and a lot of normal non-geeks thought of him as a genuine visionary. Obviously having palled around with Epstein has further clouded his legacy these days.
> Oh that startup post is great (still doing the archive trawl). I'm going to send that everyone who asks me whether they should do a startup.
Thanks! Glad you enjoyed it, and appreciate it being shared, that's pretty much why I write.
I'm not surprised that we've sort of "parallel evolved" to similar valuations, the ownership percentages are similar enough and at some point the math just drives you to a certain range for answers that work.
But yeah, that's the area that I've gotten the most pushback from, ironically, from both normies and founders.
> I actually do think that culture is probably the biggest reason why America leads the world in innovation; other developed countries just aren't even close.
I agree, and although I've been an expat since I retired young a few years ago, I'm really grateful I'm an American (especially having done business in other countries).
One pretty interesting thread on exactly this is this article on why high skill immigration might be a bad thing(!):
I don't fully buy his position, but it was definitely a reasonably well supported and interesting take, and really made me stop and think about high skill immigration in a way I never had before. I actually thought here that we were already selecting for a higher risk tolerance and more gritty and capable population with immigration in the first place, and seeing that it's not necessarily netting out that way vs American baselines was really interesting.
I agree with you the trends are concerning overall, that census graph is crazy - more than a 2.5x decline! And I thought people were MORE mobile now, because careers don't last as long and you need to move around to chase raises and jobs! I was not aware, I saved that in my "interesting graphs and factoids" folder.
> (I also suspect that's a big reason that there are so many people to try to kill LLMs in the cradle: people in their 20s and 30s---nearly all political staffers---just haven't witnessed a technological boom that led to huge increases in their wellbeing. Contrast social media with, say, manufacturing after WW2 or the jet age or the PC revolution in the 80s or the web in the 90s.)
This was a great point.
I see a common background to that more skeptical / technological net harm trend, actually - I've written about it in a couple of places. Largely, when you have an army of thousands of Phd's optimizing against you, this is a fully adversarial process where a lot of non-legible value gets consumed or extracted.
Examples are things like:
1. Phone apps, with phone screen time going from 2 hours a day in 2014 to 7 hours a day today.
2. Ultra processed food, where those Phd's spent decades of collective brainpower making snack and junk food ever tastier and "moreish," culminating in 75%+ of Americans being overweight or obese
3. Online ad placement - buying ads on FB or Goog as a business is a furious Red Queen's Race that rarely nets positive, because you're against competitors in an ecosystem that's been aggressively tuned across multiple domains for years, so unless you want to become an expert at SEO *and* A/B testing on your own funnel *and* A/B testing niche-enough keywords to be net positive, *and* demographically modeling your own customers to align with the duopoly categories available, etc.
Basically, average people are being hacked (successfully) by teams of thousands of Phd's to pump them for incremental dollars, at a relatively high aggregate cost to quality of life and less legible metrics in people's lives.
> I suspect that I agree about FAANG acquisitions, which puts me in the minory of investors (and probably also outside the libertarian-ish audience here).
Yeah, I think there's definitely two sides - as a founder or an investor, getting acquired by one of the trillion dollar companies is an extremely viable exit with decent multiples on return and typically much faster timelines than traditional exits.
But as a country with a desire to foster more innovation and economic growth in the future? I think the argument can be made.
Probably the biggest argument for the FAAMGS is they genuinely drive some impressive R&D, and have given us real self driving cars and drone delivery and augmented reality and the like, and you're never going to do that with smaller companies (or small biz, to the book recommendation).
> Ultimately, I'm just not completely convinced that big tech really is crowding out good startups; I suspect suspect they are, but I'd only put my confidence around 60%.
Wow, really?? I can't *tell* you how often in my friend or "mentorship" circle somebody comes up with an idea that would genuinely be a decent business and address a real pain point for millions of people, and it's immediately given up because it can be counterfeited by a FAANG basically immediately if it gets any traction.
Yeah, you can go for acquisition, but there's a real risk there too, which I allude to in my startup post - if they can immediately counterfeit you with a team's worth of work for a few months and already have much bigger user bases and lock-in why would they acquire you? You've cut your odds of successful exit in half or more again.
Sure, they acquire for tactical or talent recruitment reasons too, but being acqui-hired is deciding to go where dreams go to die (for $500k a year and a buyout).
To your "admiration" point, I notice a strong political polarization there recently - basically the only tech magnate that it's culturally acceptable to admire now for both sides is Steve Jobs, I speculate it's because he did Pixar so has enough "nice, fluffy" vibes, has cultural cachet due to creating academia-and-chattering-class-beloved Apple, and being dead probably helps a lot, too. But Bezos? Brin / Page? Zuck? God forbid, Musk? At least half the country hates them and considers them ravening gilded age slavemongers, more or less, one step below literal mustachio-twirling villains - even though they're one of the country's biggest employers, create extremely high paying jobs with tons of positive externalities, and literally created exactly the apps and intellectual properties (or logistics and infrastructure) pretty much everyone on both sides uses constantly or wastes 7-10 hours a day on now.
Not sure what to do about it, though - I think it's always been our credit and strength that we ARE the most business friendly, non-corrupt large economy. I think that's still more or less respected at the top, but it's certianly a worrying trend culturally, because if the prevailing social current gets strong enough, politicans will start swimming in it and using it to get elected.
So many thoughts on that immigration article; thanks for sharing it! I'd never considered that angle before; it's a compelling argument, and I'd just defaulted to standard "the things that make you want to pick up and leave your home country will make you a great fit into the innovation economy." Like you, though, I'm not entirely convinced. Over time, every other immigrant group has basically become bog-standard American (who talks about Italian-Americans vs. German-Americans these days, even though a hundred years ago, those were profoundly separate groups?). I was surprised that he didn't reference Rice Theory (that rice-farming engenders more cooperative cultures), which seems to be the best steel-man for his case, since it's ancient enough that genetic selection could be a factor, which would make it fundamentally different from European/South American migration into the US.
That said, I suspect that's what's going on with Asians has more to do with Schumpeter's theory of how capitalism destroys itself (in a nutshell: the son of the frontier farmer becomes a rich entrepreneur whose son becomes a less-rich but still pro-market lawyer whose son becomes a poet who votes to dismantle capitalism). Given the extremely high academic achievement in that culture, they're kind of generationally speedrunning that process. Couple it with their exposure to incredible familial pressures (you must be a top 1%-er or you shame the family) along with elite overproduction (way too many people going to college and expecting to make $500k/year or whatever), and you have a lot of young people who think of themselves as failures and blame capitalism for it (which is wrong but also not entirely unrelated---like blaming light for "making" you ugly I suppose).
A lot of our society has been held together because people in the middling-IQ ranges didn't _expect_ to have more than a pretty average job. The factory worker didn't necessarily despise the college-educated CEO. But you send 40% of people to college and imply that doing so means they're going to be making six-figures or more (which is what college _did_ mean when only 10% of people did it), well, serious expectation mismatch!
Now you've got me reexamining my priors about FAANG. :) Interestingly (although we're now in a Comparison of Anecdotes), the best founders are so insanely driven and convinced of their capacity for speed that they are absolutely willing to take on the big boys. I am, admittedly, dealing with a very biased sample set, since I'm an investor, and I'm probably not getting as genuine of an interaction with hopefuls as would someone who's not actively deploying capital might.
Still, worth noting that I can't think of too many examples (outside of social media UX, which, I mean, hardly qualifies as innovation) where a big boy actually killed a startup by out-competing them. A lot of the examples that come immediately to mind (e.g. Apple's famous habit of Sherlocking) concern pretty small-ball ideas that probably weren't genuinely VC-fundable anyway, even if they were great little products. In its entire history, Google only built search and Gmail. That's literally it! Everything else, they purchased. They are structurally incapable of innovation, even though some of the smartest people in the entire history of the human species work there. It's crazy! Microsoft and Apple are a little bit better but not by that much. Consider that they all missed AI: Apple still doesn't even have a real product; MS is reliant on OAI at least for now; Google's product sucks (even though they invented transformers!); and Facebook is just giving shit away for free in an effort to stop OAI and Anthropic from dominating.
So, I think more than anything founders need to make some kind of Odysseus Pact with themselves that they won't take the buyout (because, for the founders, those buyouts are mighty tempting). Dropbox is a fun example: everyone tried to buy them, then the biggest tech companies in the world (all of them!) copied what actually is a pretty straightforward product, and DB is still a public company worth ~$8bn. And, if you've ever used OneDrive or iCloud, they totally suck in comparison!¹ So I suspect but can't prove that it's not as big a risk, although in some way that doesn't undercut your argument if a sufficiently large number of potential founders think it's true.
I think politicians already _are_ swimming with that current. The Democratic party in the US is effectively degrowth at this point, at least at the national level. Consider Mark Andreeseen's conversation with the Biden administration where they effectively told him that they were going to treat LLMs like nuclear weapons during the cold war, and "if we have to classify entire branches of math to make it happen, we'll do that just like we did in the 50s"). According to his (self-aggrandizing, I'm sure) history, that's what turned him towards Trump as a lifelong Democrat.
I'm still not any closer to ideas for how to nurture a culture of innovation here in the States, though. To your point above, economics is hard, culture is 10x harder. I think of all the tech guys, Peter Thiel used to spend the most time thinking about this, gave up, accepted that some kind of oligarchy was inevitable, and decided that he'd rather have some say over how it's structured.
¹Syncthing in turn is better than all of it, which only further proves the bizarre internet truism that, half the time, furries writing code for fun can out-compete trillion-dollar corporations.
1) I suspect the USA is pretty close to the efficient frontier for entrepreneurship (at least without radical changes to culture and social contract), but there's a lot to win with bringing other countries closer (my home country of Canada has a particularly egregious gap between extremely high human capital and very low risk tolerance/ambitiousness).
2) I've often missed about how to waste less people in finance; many a time I've looked over my open office full of smart, hard working people, doing little of real or lasting value, and thought "there's got to be a better way". As highlighted above, though, it's very hard to think of an approach that wouldn't have significant downsides/backfire/be overly controlling.
I'm just not sure Israel is a super useful comparison; I agree culture is really important, but Israel has some very unusual cultural levers that don't operate in other countries. I'm struggling to find the article, but there was a recent Substack outlining the respectability transmission mechanism in Israel from more to less religious/fertile, but that chain doesn't exist in most other countries.
The secular fertility rate in Sweden and France isn't *miles* off of the secular Israeli one (1.8-1.9 Vs 2.0, and no, excluding immigrants doesn't change this by more than 0.1), so might be more to learn there for most Western countries.
On the housing; I'm familiar with the argument that the material things are just excuses, but I think they interact with cultural factors in way that are still very real. For instance, in the UK, a house is officially classed as "overcrowded" if there's fewer than one bedroom available per child. My house cost half a million pounds in an undesirable neighbourhood and has 3 (2.5 really) bedrooms!
Also, maybe it's just a coincidence that the baby boom coincided with a historic increase in housing accessibility and that the current bust coincides with a historic decrease in affordability (especially on a one worker basis), but...
> I'm struggling to find the article, but there was a recent Substack outlining the respectability transmission mechanism in Israel from more to less religious/fertile, but that chain doesn't exist in most other countries.
Oh, interesting - so they hypothesis is something like "yes, regular Israelis aren't religious, but still hold the religious in high esteem and feel they're doing the "right" things and fertility is one of those things and trickles down?"
There were two quotes in the article I linked that I think were pretty interesting and indicative of the culture:
“In casual conversation, you will be asked how many children you have, and if you say one, people will ask why only one, and if you say two, why only two?”
"There is immense pressure to marry, and if you’re still single at 26, it’s as if a great tragedy has befallen you"
They also pointed out that Soviet jews who emigrate to Israel have the usual 1 kid from their base rates, but then *their* kids have the usual Israeli 2-3.
> The secular fertility rate in Sweden and France isn't *miles* off of the secular Israeli one (1.8-1.9 Vs 2.0, and no, excluding immigrants doesn't change this by more than 0.1), so might be more to learn there for most Western countries.
I think France is a really interesting case, because they ARE a countertrend, and always have been. Even back when fertility was super high in the Victorian age, pre-contraception, France was *lower* than everybody else by more rigorously adhering to the methods available (rhythm, sponges, etc).
Sweden looks like it's more or less on the usual trend though, it just hit 1.5 last year, and before that was 1.6: https://imgur.com/a/gIaAzHb
I have no idea what France is doing, I've never looked into it, but good call.
To your housing point, Paris is pretty expensive! And the greater metro has about 20% of France's population. Something interesting that I'll dig into.
> On the housing; I'm familiar with the argument that the material things are just excuses, but I think they interact with cultural factors in way that are still very real.
I completely agree. I mean, I even buy Zvi's contention that carseat requirements have meaningfully reduced fertility. But I think it's one of those things that's moving the needle down, along with 10-20 other things, but isn't dispositive, so even if you remove it, people don't have any more kids.
I mean, look at Japan - Tokyo is probably the most housing affordable major city in the world, and it's got ~40M people in the greater metro. Fertility is still 1.4x lower there than in the rural areas, because there's many other factors to fertility reductions (primarily education and age, then densification itself, then Red Queen's Races and ever increasing social standards of parenthood, then housing prices, etc).
The biggest *dispositive* single thing you could do is figure out some way such that you're getting 22 year olds married and pregnant versus 30 year olds. That was true in the 50's at the start of the Baby Boom wordwide. Israel's average age at first marriage is 25 versus everyone else at 29-31, and average age at first birth is 27 vs 29-31. The more you can move those two ages down, the more babies you'll have, generally.
The example I believe you shared regarding age gaps allowing both children and careers for both parents (dad goes first, basically) is the most compelling and reasonably feminist defense of it I've read, and is indeed the model that my in-laws followed.
What would a financial incentive version of that look like; one that preserves the incentives of having children early, but continues to value female contribution to the world of work? There are, of course, material disadvantages to starting late.
Spitballing here, perhaps something along the lines of giving a lifetime c.10% discount on income taxes *to the woman* per child. It incentivises having children amongst the people we want to be having children, it balances the financial scales somewhat between men and women in an early childbearing scenario, and it's relatively straightforward to implement. The big question, of course, is whether it would work.
> What would a financial incentive version of that look like; one that preserves the incentives of having children early, but continues to value female contribution to the world of work? There are, of course, material disadvantages to starting late.
Well, I know how *I* would do it, if I were God-Emperor - I think you still need to keep undergrad, because it's how a lot of high human capital couples meet.
So I'd do "wedding bonus" by age for top 50 undergrad institutions - if you're a woman enrolled in or graduated from a top 50 undergrad, and you're 22, you get $20k for marriage, and it scales down to $5k by 25, and then cuts off to zero.
Then for any babies in these marriages, you give a $30k bonus per kid at 22, scaling down to $5k by 27 and cutting off.
Then play with the bonus numbers and "top 50" thresholds as data comes in to optimize.
Once again, ZERO chance this is taken up in America. But somewhere else that actually cares and can do "elite coded" things? Maybe.
I worry about the female income tax thing, because Hungary tried it - they got a brief uptick, but then their fertility went back down to the former trends within 3-4 years.
But maybe something like my proposal (successive income tax reductions per kid), that applies to the husband for 10 years, then switches to the wife? That would be fun, and would directly incentivize them joining the workforce once the kids are big enough.
Ha, I like the switch over time from husband to wife, that's a nice touch that gives immediate benefit while punishing the husband for 'defecting' later on (albeit would it make it too expensive?)
You aren't going to cut SS, bring about polygamy, or give specific bonuses to high income/high degree people. You can't do anything obviously eugenic and exclusionary, it has to be some natural part of a more general benefit.
You might be able to give strong payroll tax breaks to parents, which would naturally scale with income.
On Au Pairs I think you are fighting a rear guard action. The less it's a "current thing" the better. Blue states are already trying to restrict Au Pairs.
You neglect to mention school vouchers, which is a free way to boost fertility and start to change the education landscape.
You can't get where you want to be by getting the top 1% to have more kids, and they already have more kids and there aren't enough of them. You need the broader middle to upper middle class to have more kids.
> You aren't going to cut SS, bring about polygamy, or give specific bonuses to high income/high degree people. You can't do anything obviously eugenic and exclusionary, it has to be some natural part of a more general benefit.
Lol, yup - I think we're in violent agreement overall.
But even if the odds of implementation are low in any given political regime, we CAN think about and point to what the best policies would be, even if they're unlikely to be implemented. After all, the US is hopeless, but places like Singapore actually have effective institutions and can do stuff like this, and Korea is getting scared enough they might try some too.
> You neglect to mention school vouchers, which is a free way to boost fertility and start to change the education landscape.
I'm not following here, why would this boost fertility? I'm pro voucher, but largely because I'm anti-"child prisons," and think public education is largely a pointless boondoggle wasting 70%+ of their funds. I just don't understand why it would drive any incremental fertility.
> You can't get where you want to be by getting the top 1% to have more kids, and they already have more kids and there aren't enough of them. You need the broader middle to upper middle class to have more kids.
Three thoughts here - yes, obviously, I agree with the high level point.
But on the 1% having more kids, this probably isn't true.
This is the famous graph most people point to for that:
Except this is only a handful of people with <120 babies in that time period, and it's survey based. Sampling error alone puts error bars so wide on that the uptick is pretty likely to be noise. There's an article on this here: https://medium.com/@lymanstone/fertility-and-income-some-notes-581e1a6db3c7
Second, because top 1% people punch so much higher than their weight, you want every single incremental one you can get. Even if you only move the needle 10%, it was way more than worth it prospectively.
Third, yeah, we definitely want the UMC / PMC to have more kids, and I was thinking of and targeting a lot of these interventions towards them. Au pairs, "the stick," STEM bonuses, etc.
Once again, this is an incremental marginal utility game - for every "top 20% or better" incremental kid we get, the likely economic and technological impacts are so high the measures are worth it. You're not really going to affect lower income and education fertility, which will still be providing the bulk of the next generations by volume, and nor should you want to, because negative eugenics is bad.
But each incremental top <20% kid will drive a lot more good for everyone, and that's why efforts should be focused there.
The only way to do that is to seismically change the culture at large. Children are literally low class now unironically to the majority of women - or worse, until reality sets in the early to mid 40s.
All men know women in certain classes now go baby hunting in their late 20s to secure a baby and dump their man systematically. No men are falling for it… even with hot women.
Nothing has worked worldwide for good reason. It's game over unless…
Give men access to artificial wombs and cloning and birthrates will stabilize
I can speak with some experience here, being a successful example of your target market:
1. WFH is amazing and fertility enhancing. One of the key problems with multiple kids is school pickups when you have a baby or toddler at home. The mom just doesn’t want to pack the little one and lug them about every day. Also so much better for lifestyle and happiness.
For those who don’t work from home, better school buses or maybe minibuses or shared cars would help. School buses theoretically exist but are so unreliable and routes are so long that they aren’t practical. You end up with traffic jams every day at school.
2. Encourage women to have artsy degrees that don’t pay off, so they don’t feel like mothering is a sacrifice. Then they can do some hobby job on the side, teach, etc for some cash.
3. Encourage DB pension plans with generous survivor options and inflation protection for spouses. If you have a younger spouse, you want to make sure she’s taken care of when you’re gone. Help with drug and benefit plans for family would help older guys retire and not have to keep working for the benefits.
4. Extra credit in government pension plans would be nice but not game changing. Government programs are for subsistence, but you want enough money in retirement for a nice lifestyle.
5. Help with recreation for larger families would be nice. Why not make museums, zoos and amusement parks free or subsidized for larger families? It wouldn’t be that expensive and would be lifestyle enhancing.
6. FYI my experience is that fertility concerns are a bit overblown and you can still have a few children if a woman is married in her late twenties. Also a man can help his issues with supplements, weight loss and care (boxers and no phones in pant pockets). But doctors don’t tell you this information. We also had advice from a geneticist that fertility and health risks really hit hard for a woman starting at 38, so consider that something of a cut off.
Another potential stick could be to treat any tax benefits or subsisidies as deferred loans that are only cleared upon remaining married until your last child turns 18 (this would of course be exempted in cases of infidelity or abuse).
I'm aware divorce isnt as much an issue for the upper classes, amending laws so that its higly disincentivized would encourage more men who arent in the upper class, but still conscientous enough to understand the drawbacks to get married. It would more so act to drag the bottom up than to bolster the top as people generally try to emulate the class(es) above them
Market it as an attempt to fight inequality, otherwise I don't think any of these ideas are practicable in a democracy.
If rich parents are having fewer children, and poor/middle class parents are having more, then this is likely to lead to significant inequality in the long run. Not only do fewer rich children benefit from the concentrated resources of two wealthy and intelligent parents when being raised, they receive an inheritance literally 2x larger than an equally wealthy family with 2 children.
Meanwhile middle class and poor parents are spreading their limited childrearing resources between (on average) more children. What inheritance they will leave (probably just a house), will be split among more beneficiaries, diluting generational wealth.
This is likely to lead to rent-seeking behavior among trust-fund kids, akin to medieval aristocracy, just without any of the of the social norms and obligations that at least kept medieval aristocratic overindulgence in check.
When someone gets rich off their own production, like Bezos, there's quite a bit of justification for allowing him to keep that wealth, as it is an encouragement to others to work hard, and develop companies that greatly increase quality of life for millions (billions?) of people. It's a weaker argument when we're talking about Rockefeller's great-great-grandkid that he never met or imagined would exist, and shares only a few percentage of his genes with. The original productive behavior has been divorced from the reward, which is only maintained at societies expense since the original inheritance was large enough that many generations of descendants could live at a high quality of life, without having to return much (if anything) to society.
In my view, low elite fertility (absent AGI or whatever) ends in a class of people who produce relatively little for society, but live off the excess production of their ancestors. While they may have higher IQ (on average) than the population at large, if their impulses aren't directed toward the benefit of society at large (as is the case under capitalism for both entrepreneurs and employees), they will just use their increased intelligence to prudently manage portfolios, operate covertly-political charitable organizations, and generally seek to maintain their wealth as best they can without directing their industry for the benefit of others. As capital becomes a higher proportion of production, this system will be easier to maintain.
Brand elite fertility intervention as an attempt to prevent a hereditary "landed-class" or "trust-fund" aristocracy, and there's likely to be a lot more support from the people who won't benefit from these interventions. Otherwise it's politically impossible in a democracy, as Joe Schmo thinks "how cum the harvard types get a free nanny, while im here struggling to pay for my kids skool?"
The ultimate justification for capitalism over other economic systems is epitomized in the Adam Smith quote:
"Every individual … neither intends to promote the public interest, nor knows how much he is promoting it. By directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention."
I am not sure this assumption holds true when the return on a large amount of capital is high enough to provide a high quality of life for an ever-concentrating number of descendants while still increasing in real terms overall.
I don’t want to live in an overpopulated suburban sprawl, old-rich-man harem world, no thanks
1) How much of the gap between desired and realised births is actually down to fertility, though? Clearly some, and more for the highly educated for the reasons you outline above, but in my case the difference in number of kids I'd like to have (four) and the number I do (two) is driven by practical issues. Housing, lack of research into pre-eclampsia, childcare costs, and a culture that makes free range parenting of the kind I had getting up effectively illegal are the barriers here.
2) I agree with forumposter above that any realistic proposal here can't explicitly target elites, but something like "woman gets 10% income tax off permanently per child" might work.
3) How much of the great accomplishments of the children of the wealthy is simply driven by their ability and willingness to take risks? Can we set up our society to make that a palatable option for more people?
1) Yeah, it's really interesting, because people always say things like "housing and childcare costs," but then when governments make those things cheap or free for people, it doesn't actually move the fertility needle in aggregate.
On housing costs, Israel is an interesting counter-example. Israel is basically the sole developed country with >=2.5 TFR. It's also a lot more expensive housing wise than everywhere else!
https://imgur.com/a/1zQ8Vxb
It's fertility is culture driven. People think it's religious, but Israel averages ~27% attending weeklyreligious services, in line with the US. Religiosity is average compared to other EU countries, and less than Poland and Italy, each of which are ~1 tfr.
It’s not the ultra-orthodox, as even secular jews have ~2 tfr and traditional jews have ~2.6 tfr, with religious jews ~4 tfr and Haredi ~6.7 tfr. There's a great article on all these points here: https://www.morebirths.com/p/understanding-high-israeli-fertility
So I think that although a lot of people SAY housing and childcare costs, they're not the true objection in the aggregate, more or less, and that if you could move a needle, moving "average age at first birth" from 29-32, where it is now, back to 22, where it was in the 50's, would do a LOT.
2). Oh yeah, these are bonkers for America. Both sides would unite to cut them down, as each would have things to hate about every single one. But there are more politically functional places that might try them, like Singapore or Korea. I mean fertility collapse is THE problem that literally every developed country is facing, and it's an existential threat, pretty much any idea has a chance of being tried at some point in the future under those pressures and incentives.
3). This is a really great question - I've often personally wondered about how much "successful entrepreneurship" and risk-taking is skill-gated versus contingent on luck.
I also wonder about what measures you could take that would make more people open to risk taking like starting a business or doing an invention. Most places have decent bankruptcy laws, so you're not personally liable if things fail. Honestly, it seems the biggest opportunity cost is time - if you spend years trying to do or start something that fails, you don't get those hours back (although you build skills that will help you in whatever you do later).
What interventions do you think would move the needle there?
Of course, many countries have different entrepreneurship rates (with the US at ~16%, versus France / Germany at ~7%, Japan and Russia at ~5%, China and Taiwan and Israel at ~10%) , so if somebody like America is at the efficient frontier, then trying to increase risk taking in the gen pop will be largely waste, as well.
Going off-topic a bit, but specifically about point 3, it's worth noting that part of the problem is that the US economy does an excellent job providing very smart people with very high income careers that are relatively low-risk (and also, societally, rather low-impact). If all you care about is wealth, you're simply much better off getting a job at GS or McKinsey or, if you're really smart, one of the outperforming quant funds. Anecdotally, the smartest, most rational, and most financially ambitious people I know all went to quant funds.
The risk/reward ratio of a startup is actually pretty high, and familial pressures play a role. After I sold my startup, I worked at a nonprofit for about a year in their venture arm. One of our founders from a lower-class family made the point that her parents were utterly opposed to her startup: "you made literally ten times my salary at 50 when you were 22. Just do that forever! Why take the risk of a wipeout for _any_ upside?"
Now I run a VC (a traditional, for-profit one), and I'll tell you that almost every good founder I've come across is not _primarily_ motivated by money. Interestingly, the best ones tend to have been either quite wealthy or quite poor. The wealthy ones have all adopted some combination of "the incremental dollar just doesn't mean that much, and I'm bored at my corporate job, and if I actually can sell my startup for $1bn, then _that_ wealth increment matters" and "if it fails, I'll just go back to earning $500k/year at Google." The opportunity cost doesn't seem like a big deal; at least to those in tech, it's easy to get rehired. The formerly-poor ones tend to be even less worried: "eh, I made it just fine with nothing the first time around; if it all blows up, I'll just do that again."
That's a long way of saying that I don't think there are many purely economic levers society can pull to make people more willing to take risky bets like building a startup.¹ The only galaxy-brained-totally-unworkable-ridiculous idea would be to just set some arbitrary cap on corporate and investment fund compensation. This maybe isn't quite as dumb as it sounds; I don't think any employee is really worth more than maybe a couple million/year. The salaries that obviously stupid CEOs like John Stumpf ² or the parade of imbeciles at Boeing earn are clearly uncorrelated with their talent. Even if you listen to, say, Ed Bastian (Delta CEO), it's pretty clear that the guy is a pretty average collegiate-level intellect; he's making tens of millions/year because he had the political skills to scramble up the ladder, not because he's a visionary (hell, the guy spent hundreds of millions to put Viasat dishes on every plane AFTER STARLINK EXISTED).
It just doesn't take that much intellectual horsepower to run a business that's already been put into place and has market dominance. It would, of course, be impossible to implement; the history of wage and price controls is about as compelling as the history of Communism. But, if we're going with "impractical but thought-provoking", limiting the ability to create generational wealth by climbing the greasy pole of corporate politics probably would create more entrepreneurialism among ambitious smart people. There would probably be a lot of terrible unintended side-effects, too; I heartily do NOT endorse this!
¹Hell, we have QSBS, which _completely exempts_ your first $10mm of capital gains from basically ANY federal taxes whatsoever! For most people, even high-earners, $10mm is pretty life-changing. It might not be FU money, but it's pretty squarely in the "never need to work again _and_ still have a top 1%-er lifestyle" money zone.
²Bottom half of a mediocre high school; no-name college; first job as a repo man.
> If all you care about is wealth, you're simply much better off getting a job at GS or McKinsey or, if you're really smart, one of the outperforming quant funds. Anecdotally, the smartest, most rational, and most financially ambitious people I know all went to quant funds.
Yep, I *completely* agree, I talk about all these factors in my post about whether you should do a startup here: https://performativebafflement.substack.com/p/should-you-do-a-startup-a-tactical?r=17hw9h
> That's a long way of saying that I don't think there are many purely economic levers society can pull to make people more willing to take risky bets like building a startup.
Agree on this, too, and your general assessment of a lot of existing startup talent doing it because their downsides are covered.
I think the bigger lever we can move is culture - as I try to point out in my startup post, doing a startup is *literally* "the best use of your powers along lines of excellence," and you're essentially 10-1000x-ing your overall positive impact on the world by choosing to do one versus working at a FAANG or Goldman.
But it's kind of hard to get that message out to the FAANG and finance crowd - risk aversion is real, and when you have a guaranteed $500k a year AND much easier work weeks, it's pretty tough to persuade somebody to give that up.
> limiting the ability to create generational wealth by climbing the greasy pole of corporate politics probably would create more entrepreneurialism among ambitious smart people.
Yeah, I like this idea for the fact it's bold and different, but I'd legitimately worry about cooling economic growth overall, or it being gamed or Goodhearted some other net destructive way depending on the implementation details. It sounds like you ultimately judge it similarly.
That said, in the similar space, I think there's definitely something to be said for either limiting the ability for industry spanning companies to acquire smaller ones, or to somehow hasten the competitive landscape and eventual death of larger companies in favor of smaller ones. Because right now, everything innovative in the last 20 years has been bought by a FAANG (first Microsoft, then GOOG and META) to prevent competition, and they're so dominant and have such tentacles in basically everything that they can keep doing that until some entirely orthogonal company wrecks them.
I think a more competitive landscape would probably be net positive overall, in other words. But the implementation is always the hardest part, because you know whatever you try to do will be lobbied hard and Goodhearted harder.
Oh that startup post is great (still doing the archive trawl). I'm going to send that everyone who asks me whether they should do a startup. Funny coincidence: you come up with a target EV of $1.5bn for it to be worthwhile for a founder, and that's almost the exact target value we use internally when deciding to invest. Given the failure rate at the seed stage, we have to underwrite every investment to that outcome to have a chance at 6x-ing the fund (20% IRR over a decade). It's shocking how many deals we see where the total wild-success-everything-goes-right upside is like a $50mm exit.
I was thinking to put something in my reply about culture, but it was getting crazy long as-is (and kind of off topic to the actual post). I actually do think that culture is probably the biggest reason why America leads the world in innovation; other developed countries just aren't even close. It's concerning that culture of innovation and exploration is definitely getting worse in an absolute sense: just look at the dramatic drop in geographic mobility https://www.census.gov/library/visualizations/time-series/demo/historic.html. I suspect that it might be inevitable---just like, to bring it back around a bit to your original post---fertility. There's just so much less of a spur to take risk when, if you're smart and ambitious, you can come out of the gates making $200k and go up from there.
On the bright side, though, we might just be in a particularly rough cultural time. The big wealth-generating startup innovation of the past two decades has been social media, and (unusually for a technology) most people believe that it's actually pretty terrible. At a minimum, I think it's hard to argue that the good outweighs the bad, and a lot of people genuinely believe that it's an unalloyed bad. Do any super-smart ambitious people really revere Mark Zuckerberg the way people revered Steve Jobs or even Bill Gates¹? I don't have empirical proof, but I suspect not.
(I also suspect that's a big reason that there are so many people to try to kill LLMs in the cradle: people in their 20s and 30s---nearly all political staffers---just haven't witnessed a technological boom that led to huge increases in their wellbeing. Contrast social media with, say, manufacturing after WW2 or the jet age or the PC revolution in the 80s or the web in the 90s.)
I suspect that I agree about FAANG acquisitions, which puts me in the minory of investors (and probably also outside the libertarian-ish audience here). I had an argument recently with some other investors who were celebrating Lina Khan's ouster (that's by far the majority view in venture), and while enabling consolidation does make high-value acquisitions in the near-term more likely, I think it's bad for innovation overall. Especially given that they're not especially well-run companies (Google in particular is a joke; it's like a sclerotic search-enabled petro-state). That said, overall corporate lifetimes have been falling forever (https://www.imd.org/research-knowledge/disruption/articles/why-you-will-probably-live-longer-than-most-big-companies/) and I wouldn't be at all surprised if superior LLMs end up greatly diminishing or killing Google by diluting their search results and outperforming their inhouse models (a great irony, of course, seeing as they invented the very technology behind these LLMs and were too incompetent to develop it into a useful product).
Contra my own view to some extent: I very much enjoyed this book, which does a good job countering Big Business = Bad narrative: https://www.amazon.com/Big-Beautiful-Debunking-Small-Business/dp/026203770X. That said, the author is mostly comparing big companies against traditional small businesses, not startups. Ultimately, I'm just not completely convinced that big tech really is crowding out good startups; I suspect suspect they are, but I'd only put my confidence around 60%. Tech is also changing incredibly quickly right now, which almost always benefits new entrants. It may just not matter all that much either way.
¹Yes there were haters, especially in open-source-land, but _The Road Ahead_ was a runaway bestseller in the 90s, and a lot of normal non-geeks thought of him as a genuine visionary. Obviously having palled around with Epstein has further clouded his legacy these days.
> Oh that startup post is great (still doing the archive trawl). I'm going to send that everyone who asks me whether they should do a startup.
Thanks! Glad you enjoyed it, and appreciate it being shared, that's pretty much why I write.
I'm not surprised that we've sort of "parallel evolved" to similar valuations, the ownership percentages are similar enough and at some point the math just drives you to a certain range for answers that work.
But yeah, that's the area that I've gotten the most pushback from, ironically, from both normies and founders.
> I actually do think that culture is probably the biggest reason why America leads the world in innovation; other developed countries just aren't even close.
I agree, and although I've been an expat since I retired young a few years ago, I'm really grateful I'm an American (especially having done business in other countries).
One pretty interesting thread on exactly this is this article on why high skill immigration might be a bad thing(!):
https://arctotherium.substack.com/p/increasing-skilled-immigration-is
I don't fully buy his position, but it was definitely a reasonably well supported and interesting take, and really made me stop and think about high skill immigration in a way I never had before. I actually thought here that we were already selecting for a higher risk tolerance and more gritty and capable population with immigration in the first place, and seeing that it's not necessarily netting out that way vs American baselines was really interesting.
I agree with you the trends are concerning overall, that census graph is crazy - more than a 2.5x decline! And I thought people were MORE mobile now, because careers don't last as long and you need to move around to chase raises and jobs! I was not aware, I saved that in my "interesting graphs and factoids" folder.
> (I also suspect that's a big reason that there are so many people to try to kill LLMs in the cradle: people in their 20s and 30s---nearly all political staffers---just haven't witnessed a technological boom that led to huge increases in their wellbeing. Contrast social media with, say, manufacturing after WW2 or the jet age or the PC revolution in the 80s or the web in the 90s.)
This was a great point.
I see a common background to that more skeptical / technological net harm trend, actually - I've written about it in a couple of places. Largely, when you have an army of thousands of Phd's optimizing against you, this is a fully adversarial process where a lot of non-legible value gets consumed or extracted.
Examples are things like:
1. Phone apps, with phone screen time going from 2 hours a day in 2014 to 7 hours a day today.
2. Ultra processed food, where those Phd's spent decades of collective brainpower making snack and junk food ever tastier and "moreish," culminating in 75%+ of Americans being overweight or obese
3. Online ad placement - buying ads on FB or Goog as a business is a furious Red Queen's Race that rarely nets positive, because you're against competitors in an ecosystem that's been aggressively tuned across multiple domains for years, so unless you want to become an expert at SEO *and* A/B testing on your own funnel *and* A/B testing niche-enough keywords to be net positive, *and* demographically modeling your own customers to align with the duopoly categories available, etc.
Basically, average people are being hacked (successfully) by teams of thousands of Phd's to pump them for incremental dollars, at a relatively high aggregate cost to quality of life and less legible metrics in people's lives.
> I suspect that I agree about FAANG acquisitions, which puts me in the minory of investors (and probably also outside the libertarian-ish audience here).
Yeah, I think there's definitely two sides - as a founder or an investor, getting acquired by one of the trillion dollar companies is an extremely viable exit with decent multiples on return and typically much faster timelines than traditional exits.
But as a country with a desire to foster more innovation and economic growth in the future? I think the argument can be made.
Probably the biggest argument for the FAAMGS is they genuinely drive some impressive R&D, and have given us real self driving cars and drone delivery and augmented reality and the like, and you're never going to do that with smaller companies (or small biz, to the book recommendation).
> Ultimately, I'm just not completely convinced that big tech really is crowding out good startups; I suspect suspect they are, but I'd only put my confidence around 60%.
Wow, really?? I can't *tell* you how often in my friend or "mentorship" circle somebody comes up with an idea that would genuinely be a decent business and address a real pain point for millions of people, and it's immediately given up because it can be counterfeited by a FAANG basically immediately if it gets any traction.
Yeah, you can go for acquisition, but there's a real risk there too, which I allude to in my startup post - if they can immediately counterfeit you with a team's worth of work for a few months and already have much bigger user bases and lock-in why would they acquire you? You've cut your odds of successful exit in half or more again.
Sure, they acquire for tactical or talent recruitment reasons too, but being acqui-hired is deciding to go where dreams go to die (for $500k a year and a buyout).
To your "admiration" point, I notice a strong political polarization there recently - basically the only tech magnate that it's culturally acceptable to admire now for both sides is Steve Jobs, I speculate it's because he did Pixar so has enough "nice, fluffy" vibes, has cultural cachet due to creating academia-and-chattering-class-beloved Apple, and being dead probably helps a lot, too. But Bezos? Brin / Page? Zuck? God forbid, Musk? At least half the country hates them and considers them ravening gilded age slavemongers, more or less, one step below literal mustachio-twirling villains - even though they're one of the country's biggest employers, create extremely high paying jobs with tons of positive externalities, and literally created exactly the apps and intellectual properties (or logistics and infrastructure) pretty much everyone on both sides uses constantly or wastes 7-10 hours a day on now.
Not sure what to do about it, though - I think it's always been our credit and strength that we ARE the most business friendly, non-corrupt large economy. I think that's still more or less respected at the top, but it's certianly a worrying trend culturally, because if the prevailing social current gets strong enough, politicans will start swimming in it and using it to get elected.
So many thoughts on that immigration article; thanks for sharing it! I'd never considered that angle before; it's a compelling argument, and I'd just defaulted to standard "the things that make you want to pick up and leave your home country will make you a great fit into the innovation economy." Like you, though, I'm not entirely convinced. Over time, every other immigrant group has basically become bog-standard American (who talks about Italian-Americans vs. German-Americans these days, even though a hundred years ago, those were profoundly separate groups?). I was surprised that he didn't reference Rice Theory (that rice-farming engenders more cooperative cultures), which seems to be the best steel-man for his case, since it's ancient enough that genetic selection could be a factor, which would make it fundamentally different from European/South American migration into the US.
That said, I suspect that's what's going on with Asians has more to do with Schumpeter's theory of how capitalism destroys itself (in a nutshell: the son of the frontier farmer becomes a rich entrepreneur whose son becomes a less-rich but still pro-market lawyer whose son becomes a poet who votes to dismantle capitalism). Given the extremely high academic achievement in that culture, they're kind of generationally speedrunning that process. Couple it with their exposure to incredible familial pressures (you must be a top 1%-er or you shame the family) along with elite overproduction (way too many people going to college and expecting to make $500k/year or whatever), and you have a lot of young people who think of themselves as failures and blame capitalism for it (which is wrong but also not entirely unrelated---like blaming light for "making" you ugly I suppose).
A lot of our society has been held together because people in the middling-IQ ranges didn't _expect_ to have more than a pretty average job. The factory worker didn't necessarily despise the college-educated CEO. But you send 40% of people to college and imply that doing so means they're going to be making six-figures or more (which is what college _did_ mean when only 10% of people did it), well, serious expectation mismatch!
Now you've got me reexamining my priors about FAANG. :) Interestingly (although we're now in a Comparison of Anecdotes), the best founders are so insanely driven and convinced of their capacity for speed that they are absolutely willing to take on the big boys. I am, admittedly, dealing with a very biased sample set, since I'm an investor, and I'm probably not getting as genuine of an interaction with hopefuls as would someone who's not actively deploying capital might.
Still, worth noting that I can't think of too many examples (outside of social media UX, which, I mean, hardly qualifies as innovation) where a big boy actually killed a startup by out-competing them. A lot of the examples that come immediately to mind (e.g. Apple's famous habit of Sherlocking) concern pretty small-ball ideas that probably weren't genuinely VC-fundable anyway, even if they were great little products. In its entire history, Google only built search and Gmail. That's literally it! Everything else, they purchased. They are structurally incapable of innovation, even though some of the smartest people in the entire history of the human species work there. It's crazy! Microsoft and Apple are a little bit better but not by that much. Consider that they all missed AI: Apple still doesn't even have a real product; MS is reliant on OAI at least for now; Google's product sucks (even though they invented transformers!); and Facebook is just giving shit away for free in an effort to stop OAI and Anthropic from dominating.
So, I think more than anything founders need to make some kind of Odysseus Pact with themselves that they won't take the buyout (because, for the founders, those buyouts are mighty tempting). Dropbox is a fun example: everyone tried to buy them, then the biggest tech companies in the world (all of them!) copied what actually is a pretty straightforward product, and DB is still a public company worth ~$8bn. And, if you've ever used OneDrive or iCloud, they totally suck in comparison!¹ So I suspect but can't prove that it's not as big a risk, although in some way that doesn't undercut your argument if a sufficiently large number of potential founders think it's true.
I think politicians already _are_ swimming with that current. The Democratic party in the US is effectively degrowth at this point, at least at the national level. Consider Mark Andreeseen's conversation with the Biden administration where they effectively told him that they were going to treat LLMs like nuclear weapons during the cold war, and "if we have to classify entire branches of math to make it happen, we'll do that just like we did in the 50s"). According to his (self-aggrandizing, I'm sure) history, that's what turned him towards Trump as a lifelong Democrat.
I'm still not any closer to ideas for how to nurture a culture of innovation here in the States, though. To your point above, economics is hard, culture is 10x harder. I think of all the tech guys, Peter Thiel used to spend the most time thinking about this, gave up, accepted that some kind of oligarchy was inevitable, and decided that he'd rather have some say over how it's structured.
¹Syncthing in turn is better than all of it, which only further proves the bizarre internet truism that, half the time, furries writing code for fun can out-compete trillion-dollar corporations.
1) I suspect the USA is pretty close to the efficient frontier for entrepreneurship (at least without radical changes to culture and social contract), but there's a lot to win with bringing other countries closer (my home country of Canada has a particularly egregious gap between extremely high human capital and very low risk tolerance/ambitiousness).
2) I've often missed about how to waste less people in finance; many a time I've looked over my open office full of smart, hard working people, doing little of real or lasting value, and thought "there's got to be a better way". As highlighted above, though, it's very hard to think of an approach that wouldn't have significant downsides/backfire/be overly controlling.
I'm just not sure Israel is a super useful comparison; I agree culture is really important, but Israel has some very unusual cultural levers that don't operate in other countries. I'm struggling to find the article, but there was a recent Substack outlining the respectability transmission mechanism in Israel from more to less religious/fertile, but that chain doesn't exist in most other countries.
The secular fertility rate in Sweden and France isn't *miles* off of the secular Israeli one (1.8-1.9 Vs 2.0, and no, excluding immigrants doesn't change this by more than 0.1), so might be more to learn there for most Western countries.
On the housing; I'm familiar with the argument that the material things are just excuses, but I think they interact with cultural factors in way that are still very real. For instance, in the UK, a house is officially classed as "overcrowded" if there's fewer than one bedroom available per child. My house cost half a million pounds in an undesirable neighbourhood and has 3 (2.5 really) bedrooms!
Also, maybe it's just a coincidence that the baby boom coincided with a historic increase in housing accessibility and that the current bust coincides with a historic decrease in affordability (especially on a one worker basis), but...
> I'm struggling to find the article, but there was a recent Substack outlining the respectability transmission mechanism in Israel from more to less religious/fertile, but that chain doesn't exist in most other countries.
Oh, interesting - so they hypothesis is something like "yes, regular Israelis aren't religious, but still hold the religious in high esteem and feel they're doing the "right" things and fertility is one of those things and trickles down?"
There were two quotes in the article I linked that I think were pretty interesting and indicative of the culture:
“In casual conversation, you will be asked how many children you have, and if you say one, people will ask why only one, and if you say two, why only two?”
"There is immense pressure to marry, and if you’re still single at 26, it’s as if a great tragedy has befallen you"
They also pointed out that Soviet jews who emigrate to Israel have the usual 1 kid from their base rates, but then *their* kids have the usual Israeli 2-3.
> The secular fertility rate in Sweden and France isn't *miles* off of the secular Israeli one (1.8-1.9 Vs 2.0, and no, excluding immigrants doesn't change this by more than 0.1), so might be more to learn there for most Western countries.
I think France is a really interesting case, because they ARE a countertrend, and always have been. Even back when fertility was super high in the Victorian age, pre-contraception, France was *lower* than everybody else by more rigorously adhering to the methods available (rhythm, sponges, etc).
Sweden looks like it's more or less on the usual trend though, it just hit 1.5 last year, and before that was 1.6: https://imgur.com/a/gIaAzHb
I have no idea what France is doing, I've never looked into it, but good call.
To your housing point, Paris is pretty expensive! And the greater metro has about 20% of France's population. Something interesting that I'll dig into.
> On the housing; I'm familiar with the argument that the material things are just excuses, but I think they interact with cultural factors in way that are still very real.
I completely agree. I mean, I even buy Zvi's contention that carseat requirements have meaningfully reduced fertility. But I think it's one of those things that's moving the needle down, along with 10-20 other things, but isn't dispositive, so even if you remove it, people don't have any more kids.
I mean, look at Japan - Tokyo is probably the most housing affordable major city in the world, and it's got ~40M people in the greater metro. Fertility is still 1.4x lower there than in the rural areas, because there's many other factors to fertility reductions (primarily education and age, then densification itself, then Red Queen's Races and ever increasing social standards of parenthood, then housing prices, etc).
The biggest *dispositive* single thing you could do is figure out some way such that you're getting 22 year olds married and pregnant versus 30 year olds. That was true in the 50's at the start of the Baby Boom wordwide. Israel's average age at first marriage is 25 versus everyone else at 29-31, and average age at first birth is 27 vs 29-31. The more you can move those two ages down, the more babies you'll have, generally.
The example I believe you shared regarding age gaps allowing both children and careers for both parents (dad goes first, basically) is the most compelling and reasonably feminist defense of it I've read, and is indeed the model that my in-laws followed.
What would a financial incentive version of that look like; one that preserves the incentives of having children early, but continues to value female contribution to the world of work? There are, of course, material disadvantages to starting late.
Spitballing here, perhaps something along the lines of giving a lifetime c.10% discount on income taxes *to the woman* per child. It incentivises having children amongst the people we want to be having children, it balances the financial scales somewhat between men and women in an early childbearing scenario, and it's relatively straightforward to implement. The big question, of course, is whether it would work.
> What would a financial incentive version of that look like; one that preserves the incentives of having children early, but continues to value female contribution to the world of work? There are, of course, material disadvantages to starting late.
Well, I know how *I* would do it, if I were God-Emperor - I think you still need to keep undergrad, because it's how a lot of high human capital couples meet.
So I'd do "wedding bonus" by age for top 50 undergrad institutions - if you're a woman enrolled in or graduated from a top 50 undergrad, and you're 22, you get $20k for marriage, and it scales down to $5k by 25, and then cuts off to zero.
Then for any babies in these marriages, you give a $30k bonus per kid at 22, scaling down to $5k by 27 and cutting off.
Then play with the bonus numbers and "top 50" thresholds as data comes in to optimize.
Once again, ZERO chance this is taken up in America. But somewhere else that actually cares and can do "elite coded" things? Maybe.
I worry about the female income tax thing, because Hungary tried it - they got a brief uptick, but then their fertility went back down to the former trends within 3-4 years.
But maybe something like my proposal (successive income tax reductions per kid), that applies to the husband for 10 years, then switches to the wife? That would be fun, and would directly incentivize them joining the workforce once the kids are big enough.
Ha, I like the switch over time from husband to wife, that's a nice touch that gives immediate benefit while punishing the husband for 'defecting' later on (albeit would it make it too expensive?)
You aren't going to cut SS, bring about polygamy, or give specific bonuses to high income/high degree people. You can't do anything obviously eugenic and exclusionary, it has to be some natural part of a more general benefit.
You might be able to give strong payroll tax breaks to parents, which would naturally scale with income.
On Au Pairs I think you are fighting a rear guard action. The less it's a "current thing" the better. Blue states are already trying to restrict Au Pairs.
You neglect to mention school vouchers, which is a free way to boost fertility and start to change the education landscape.
You can't get where you want to be by getting the top 1% to have more kids, and they already have more kids and there aren't enough of them. You need the broader middle to upper middle class to have more kids.
> You aren't going to cut SS, bring about polygamy, or give specific bonuses to high income/high degree people. You can't do anything obviously eugenic and exclusionary, it has to be some natural part of a more general benefit.
Lol, yup - I think we're in violent agreement overall.
But even if the odds of implementation are low in any given political regime, we CAN think about and point to what the best policies would be, even if they're unlikely to be implemented. After all, the US is hopeless, but places like Singapore actually have effective institutions and can do stuff like this, and Korea is getting scared enough they might try some too.
> You neglect to mention school vouchers, which is a free way to boost fertility and start to change the education landscape.
I'm not following here, why would this boost fertility? I'm pro voucher, but largely because I'm anti-"child prisons," and think public education is largely a pointless boondoggle wasting 70%+ of their funds. I just don't understand why it would drive any incremental fertility.
> You can't get where you want to be by getting the top 1% to have more kids, and they already have more kids and there aren't enough of them. You need the broader middle to upper middle class to have more kids.
Three thoughts here - yes, obviously, I agree with the high level point.
But on the 1% having more kids, this probably isn't true.
This is the famous graph most people point to for that:
https://imgur.com/a/TUE7M0g
Except this is only a handful of people with <120 babies in that time period, and it's survey based. Sampling error alone puts error bars so wide on that the uptick is pretty likely to be noise. There's an article on this here: https://medium.com/@lymanstone/fertility-and-income-some-notes-581e1a6db3c7
Second, because top 1% people punch so much higher than their weight, you want every single incremental one you can get. Even if you only move the needle 10%, it was way more than worth it prospectively.
Third, yeah, we definitely want the UMC / PMC to have more kids, and I was thinking of and targeting a lot of these interventions towards them. Au pairs, "the stick," STEM bonuses, etc.
Once again, this is an incremental marginal utility game - for every "top 20% or better" incremental kid we get, the likely economic and technological impacts are so high the measures are worth it. You're not really going to affect lower income and education fertility, which will still be providing the bulk of the next generations by volume, and nor should you want to, because negative eugenics is bad.
But each incremental top <20% kid will drive a lot more good for everyone, and that's why efforts should be focused there.
The only way to do that is to seismically change the culture at large. Children are literally low class now unironically to the majority of women - or worse, until reality sets in the early to mid 40s.
All men know women in certain classes now go baby hunting in their late 20s to secure a baby and dump their man systematically. No men are falling for it… even with hot women.
Nothing has worked worldwide for good reason. It's game over unless…