(Almost) Daily Musings

Evening all

23 years ago Enron went bust. On account of creatively cooking their books. Today they just as creatively took to social media. Via X the former energy behemoth announced: We’re back.

How much truth there is to this is yet to be determined. In the meantime, I will not refrain from this perfect opportunity to play Backstreet’s Back on repeat and share today’s musing.

Cheers
Philip

Big Read. Bigger Charts.

Today’s FT Big Read served as an echo to the recent Draghi report and Lagarde’s comments on EU competitiveness.

• US labor productivity has grown by 30% since the 2008–09 financial crisis—more than 3x the pace of the Eurozone and the UK.

• US vs. EU productivity has slumped since the '90s and never recovered. Honestly, not shocking: Omen, Tresor, and Berghain opened in '88, '91, and '98, respectively. How does anyone stay productive in that context?

• The productivity gap, visible for over a decade, is reshaping the global economy.

• Draghi’s analysis: Without tech, US and EU productivity levels are nearly identical. But tech spending shifts the narrative dramatically. (Cue the bubble chart: purple marks tech spending.) Europe is still propping up legacy auto players, and it shows—competitiveness is declining.

• The US has captured 83% of VC funding among G7 economies over the past decade.

• It also attracted 14.6% of global greenfield FDI in the first 10 months of 2024—new records

• Germany? It registered its lowest share of global FDI in 18 years.

• Meanwhile, the US economy is surging. GDP has expanded 11.4% since 2019, and the IMF forecasts 2.8% growth for this year—far outpacing other advanced economies.

• J “Power Pivot” Powell adds a note of caution on productivity that touches on a fan favorite topic: Mean reversion: “The lore on productivity readings is that whenever you see high readings, you should assume they’re going to revert pretty quickly to the longer-term trend.”

• Moody’s, of course, doesn’t mince words. Remember their takedown of PE holdings? This time, they argue that Trump’s policies may tarnish US tech exceptionalism.

Lagarde and Draghi also argue that Europe’s issue isn’t just regulation—it’s competition. Enter Martin Wolf, who posits that Europe’s challenges (healthcare access, education, funding disparities) could be what’s stifling entrepreneurial hunger.

As Wolf puts it, the pathologies of inequality in the US may well be the price of dynamism. (For emphasis, there’s a graph illustrating how the top 1% continues hoarding net wealth — US leading the ranks in this category as well)

Hair on Fire Sectors (thanks for the phrasing, Sequoia)

If Wolf is right — I tend to always assume he is — then one naturally may ask: Which sectors are ripe for innovation — where are the problems? A few come to mind:

• Fair fertility treatment: Access remains deeply inequitable

  

• Compliance costs and regulation: Since 2011, more laws have been added than removed, with compliance now costing EUR 30bn annually (~0.7% of GDP)

  

• Energy prices: Peaking at unprecedented levels. Gas reserves are down to 93.4%, below the levels of 2023, 2022, and even 2019. A potential winter energy crisis looms.

  
  
  

• Other noteworthy mentions:

  • Affordable housing and financing: The gap here only widens.

  • Auto suppliers and machinery innovation: These industries urgently need reinvention to stay globally competitive.

Why Does This Matter?

It screams opportunity for VC investors. The US shows a unique tolerance for risk—at both investor and government levels. “US investors take greater risks across everything in tech than any other country,” according to Michael Buhr, a Silicon Valley-based Canadian entrepreneur. This risk appetite creates a flywheel effect: Successful investments fund new ventures, creating a virtuous cycle of growth. Venture funding still has a long way to go to catch up with its US comparatives — a blue print for what's possible and the flywheel we can create here