Growth is All You Need
Why economic growth solves all problems.
In startups, we talk a lot about how great culture drives business growth. I believe this is the wrong way of looking at it. In fact, I believe only the converse is true: growth fuels culture. I.e. if things are up and to the right, everyone’s having a great time. If growth is slowing or even reversing, no one is having a great time.
Great culture buys you the benefit of the doubt. It buys you time when things are bad. Employees will stick around for a bit longer to see if things will turn around. But great culture is neither sufficient nor necessary to build a great company. We had friends joining startups with explosive growth. We knew that the culture was awful, but being on a rocket-ship was exciting. When growth slowed, they abandoned ship. In contrast, I worked at a company with amazing culture. When things slowed there, people stayed a bit longer than they would have otherwise. But they left all the same.
I believe the same holds for nations. As long as growth is great, people will flock to them. Even if quality of life on other axes is objectively worse (San Francisco comes to mind). Conversely, if growth slows, there is an exodus. The rate of this is determined by that country’s “culture” (i.e. quality of life). Europe has great culture, but abysmal growth. We gave her the benefit of the doubt, but now we want to move on.
The Malaise
What I think most Europeans do not realise, is that Europe has not grown in 20 years. Inflation-adjusted, we still have the same GDP per capita as we did in 2008, while the UK now spends more on the interest of its debt than on education or national defence. Gen Z have never experienced economic growth in their (adult) lives. Can you blame them if they feel stuck?
Far-left and far-right parties are gaining traction across Europe. In the UK, Reform is leading the polls and the Greens are growing fast. Online commentators such as Gary Stevenson and Tucker Carlson are reaching millions of people and influencing public opinion. It is fair to say the centrist status quo is losing cultural relevance. But why is that? Many blame social media or “fake news”; that we are all being brainwashed. This is wrong.
Both the left and the right are correct about their core issues. Yes, the rich are pushing you out of your houses. And yes, the immigrants are taking your jobs. Both of these are true, and they resonate with people because they are true. People actually have a pretty good sense for what real and fake problems are. So telling them they are misinformed or stupid is not going to convince anyone[1].
The problem with these movements is not their issues, but their solutions. What makes their issues correct? Do the rich always steal houses and immigrants always take jobs? These can only be true, if there are a fixed number of houses and a fixed number of jobs. In other words, when there is no growth[2]. In the short term, you can increase housing and job availability by locking certain people out of the market. But in the long run, this is only going to hurt growth further and you will continue the vicious cycle. To solve these issues we need to address the root cause, which is lack of growth.
The Remedy
So how do we solve the growth crisis? It starts by convincing people that growth is not only possible, but it is necessary. That stagnation is not an option. That degrowth is death. We need to win hearts and minds, as all politics is downstream of culture. And to change culture you have to produce culture. This means mass media, events, articles, etc.. Political lobbying can help, but is not sustainable. Policies without popular support are a waste of time.
So first off, we need to convince people that winning is possible. In Europe we suffer from defeatism. We believe nothing can change, and even if it could, it would be for the worse[3]. So we might as well cash a cheque from a big American firm. But it does not have to be this way. There are many European success stories, and we should do a better job of telling them and making them relatable for people[4].
Next, we have to convince people that winning is fun. Actually, there is nothing more fun than a hard-won victory. If you don’t think the payoff will be worth it, why go through the trouble? I have found celebrating other people’s victories very motivating, and no one does this better than the Americans. Seeing other people’s success does not only tell you that you can do it too, but also that you will be celebrated for it.
And finally, people need to understand that winning is not optional. Stacking wins creates growth. And growth solves everything else. If we want a social safety net and public services, we need growth to pay for these. Winning (and in turn growth) is everything. No gold stars for effort.
Conclusion
Personally, I believe that we have a very long and difficult road ahead of us. Primarily because the cultural winds are blowing so hard in the opposite direction. But if running a company has taught me anything, it is that the winds can change very quickly and that persistence melts away all obstacles.
[1] Or worse, Baby Boomers — who grew up during the steepest economic growth in history — telling young folks to “just work harder” will do nothing but breed resentment.
[2] In a brief slip-up, even Gary admitted this. So close, Gary!
[4] Harry Stebbings, Matt Clifford, and LFG are doing God’s work here
Interesting piece! There are some great quotes from Carver Mead on Moore's Law. Mead (as well as others) argue that Moore's prediction was important because:
1.) It let people believe that exponential growth was possible. Carver Mead would say in an interview with the Computer History Museum, "The industry believed it, and because they believed it, they guided their actions by it.", before going on to talk about how because the industry believed the trajectory was possible, they followed it.
2.) It created a more competitive dynamic. Moore spoke about this in one of his interviews with the CHM, basically saying people had to match the curve or risk falling behind, so an incredible amount of resources were dedicated to matching the curve.
But today, Moore's Law is slowing down, despite massive spending across the semiconductor industry. Nicholas Bloom notes in "Are Ideas Getting Harder to Find?" notes that the resources required to maintain Moore's Law have increased 18-fold since the trend began. Exciting people and encouraging optimism is important, but economic progress heavily relies on innovation. Incredible growth requires (continued) incredible innovation. I think once you look under the hood of innovation, you realize there are some pretty massive problems in research productivity.