- The Small Business Mentor
- Posts
- The New Rules of Geopolitics, Non-Profits Suck, and IRA Delays
The New Rules of Geopolitics, Non-Profits Suck, and IRA Delays
What I'm Reading, Watching, and Listening To
Alan Pentz
August 16, 2024
Welcome back to The Small Business Mentor!
A quick message before we jump in:
If you haven’t already, be sure to check out the Small Business Mentor Podcast wherever you listen to your podcasts
If you’re reading this online, subscribe HERE and join thousands of business owners and professionals receiving these emails every week.
Let’s dive in…
Marko Papic shares my exact world view in this excellent interview on The Market Huddle. I couldn’t count all the times I was saying, “You’re damn right!” He’s the smart guy’s Peter Zeihan. So many great points, including:
The Washington Consensus (low budget deficits, low inflation, free trade, etc.) is over (for now) and the final nail in the coffin was the austerity program most Western governments enacted after the Great Financial Crisis.
There is no new Cold War. Power is more dispersed now than at any time since the late 1800s and early 1900s. A real Cold War requires two dominate powers. While China and the US seem like the US and the Soviet Union post WW2, they do not have as much weight together as the US and the Soviet Union did during the Cold War. This is multi-polar and not bi-polar world.
China and the US will compete and all the other states will play them off each other.
In the short term markets over-react to geopolitical events. You can mostly fade any market trade based on a news event. But geopolitics will shape the long term economic environment.
Economic policy swings back and forth over decades between neo-liberal and populist policies. Each one always goes too far and then we shift back. We are now in a time of rising populism.
Inflation will be higher and more variable but it won’t be out of control. We’ll also see rising real wages and inequality will lessen. I also liked that he linked levels of inflation to geopolitical regimes. Unipolarity leads to globalization which leads to low inflation, lower wages, and more inequality. Multi-polarity leads to less efficient trade and economics but all that other good stuff.
Arnold Kling from In My Tribe on why he wishes his daughters and everyone else focused on working for a profit. I just highlighted the rise of populism so I’m balancing it with a bit of libertarianism. He writes:
One important economic lesson is that profit-seeking firms are accountable to customers. They compete to satisfy consumers. Business innovation means coming up with new solutions to customer problems. Firms go out of business when they no longer do as well as competitors at meeting customer needs.
Another important economic lesson is that intentions do not always determine results. Whatever the stated intention of non-profits, they are often ineffective at best and corrupt at worst.
These are important lessons to absorb. Good intentions don’t mean shit, results do but lots of people prioritize good intentions. That’s because of social desirability basis. We want to do things that seem good to other people and make us feel good but we don’t really care about actually doing good. We are messy and illogical creatures.
Kling supports local and very focused non-profits like churches, synagogues, and soup kitchens but laments the power of large non-profits that aren’t really accountable to anything. Sure they have a board and a charter but you can run a truck through those things. These institutions are inevitably captured and corrupted by employees and board members with an agenda.
A lot of Inflation Reduction Act (IRA) spending is delay. Pointer to the FT from Moses Sternstein:
Having worked with the federal government 25 or so years, I can tell you this is inevitable. The implication of this and similar coverage is that government is somehow incompetent. We talk about the lack of “state capacity.” While there is some truth to this, the reality is we shaped the system to operate this way. As I say, “you get the government you deserve.”
That’s what happens when you index for community input and waste/fraud prevention. You sacrifice speed. I’ve seen this dozens times in corporations. They can do things quickly but they create a lot of waste in doing so and roll right over the interests of multiple players. Think about Elon taking over Twitter, firing 75% of the staff, and pissing off all the advertisers. You can’t get no waste/fraud, a fair process, and speed all together.
The money will flow. But the reality is that shovel-ready projects means, “I need 18 months for procurement and 4 years for permitting. “
Keep growing,
Alan
P.S.
P.P.S.
Reply