Capital Mobility and Business Flight

Imagine for a moment you own a small piece an old, well-established, family-owned business.

Your long-lost ancestors started this company a few centuries ago, and subsequent generations built it into a global powerhouse— we’re talking $100 billion in annual revenue and hundreds of thousands of employees.

Hundreds of years later, the family business is well past its peak and is in decline.

And at this point the ownership is in the hands of thousands of descendants of the original owners. But even with all of those different perspectives, everyone agrees that something needs to change.

The various stakeholders still believe in the company, still believe that the brand can be restored to its former glory. But it’s definitely time for new leadership.

So the company starts a search to recruit a CEO. Your fingers are crossed that they find a highly experienced turnaround specialist who knows how to restore fallen stars.

Yet, to your utter bewilderment, the executive candidate that most of your fellow stakeholders support is someone who has absolutely no business experience… someone who has never managed a single employee.

In fact, he’s never even had a real job! He’s never run a budget, let alone a large organization’s, he can barely manage his own finances, and to make matters worse, he actively hates business.

Why would anyone support such a candidate for the company’s top job?

Well he’s a fairly well-spoken, charismatic guy. He has a winning smile. He checks a bunch of diversity boxes.

He also offers some ideas that really excite your fellow stakeholders— even though none of his ideas actually survive scrutiny. His ideas remind you of the election for your high school class president where one of the candidates promised to put Coca-Cola in the water fountains…

You’ve been around business long enough to know ideas are pretty worthless. Execution is what matters. But you find yourself in the minority… and the other stakeholders end up choosing this inexperienced neophyte to lead the company.

This is what NYC did yesterday in electing Zohran Mamdani. And it’s really hard for any rational person to expect a positive outcome.

It’s easy to lament the election of a card carrying Socialist. But if we’re being intellectually honest, we can acknowledge that a lot of people are suffering. They’re struggling more than they used to—and they don’t understand why.

Voters don’t understand how years of mismanagement and waste at the city level have led to a significant decline in municipal services. Crime rates are up, and even the basics like garbage collection or the city’s rat infestation just continue to get worse.

Nor do voters understand how idiotic state policies have driven productive people and businesses away from New York state to friendlier jurisdictions like Florida, resulting in a hollowing out of the tax base (and hence reduction in services).

They also don’t understand how the blowout of federal spending—starting especially with the pandemic—has resulted in higher levels of inflation.

And they definitely don’t understand the vagaries of monetary policy, and how the Federal Reserve’s mistakes have fueled the inflation problem.

Most voters don’t understand any of these things. (Neither does Mamdani.) They only know that they’re falling further behind, and they want change.

Well, change they got. Unfortunately, it’s probably not going to be a good change.

Ironically, one of the other things voters don’t understand is Socialism.

These days, most people who like the idea of socialism skew younger—too young to remember the Soviet Union.

When they think of Socialism, they think Norway. They think it’s possible to have free healthcare, free education, robust pensions and retirement, social safety nets, low unemployment, and a strong economy all at the same time.

The reality is far different.

Scandinavia has achieved certain success in its public welfare programs because, at least until recently, they were high-trust societies with relatively low corruption and high levels of competence in government administration.

A better example of Socialism is Venezuela—a very low-trust society where you have inexperienced, corrupt, incompetent people who regulate every aspect of the economy.

The end result has been everything from widespread starvation to an endless economic depression.

With the election of Mamdani, the ingredients look a lot more like Venezuela— incompetence, inexperience, high-regulation, etc.

Yet people very naively are expecting a result that looks like Scandinavia. In other words they think they can have Venezuelan inputs and Norwegian output.

Good luck with that.

We talk about all this, and more, in today’s podcast.

We cover the lunacy of some of Mamdani’s specific policies and why he won’t be able to achieve them.

We discuss Scandinavian public welfare, and why those systems are eroding thanks to multiculturalism.

We talk about why high-trust societies require shared values and social cohesion—and New York City doesn’t have any of that.

We also discuss the biggest thing that voters are missing. One of the biggest problems in the US is that it has terrible leaders. You only need to look at AOC, Bernie Sanders, Elizabeth Warren, Jasmine Crockett—complete buffoons—and wonder: how do they get elected year after year?

Voters are completely naive. And it’s hard to imagine the US fixing its problems if voters continue sending incompetent, destructive politicians to represent them.

You can listen to the full podcast here.

https://www.youtube.com/watch?v=lbLsmKoJSTY

The podcast transcript is available to you here.