American Consequences - June 2018

A CONVERSATIONWITH Mark Spitznagel

“Our central bank monetary-led boom has made debt replace wealth for a long time. That’s not sustainable, of course. (We are ‘mining’ our soil for short-term gain.) We’ll see a return to the significance of productive stuff again I think, and that even includes farming – maybe especially farming. And the Midwest has a pretty good track record with productive stuff. Hard assets will matter again. But of course, I sound ridiculous even saying such things. Like a grumpy old grandpa.” Artificially low interest rates have sent people off to chase yield in softer kinds of assets – causing asset bubbles. Yield-chasing can’t last. It’s not good business. And the places where the yield-chasing is being done aren’t the places where good businesses will be built. The Heartland states, Mark said, have to “be like Texas – better yet, Switzerland – business friendly.” And he said they were getting there. “Michigan is a right-to-work state now.” (Meaning that employees can’t be forced to join unions against their will.) This once would have been unimaginable in the state that was Jimmy Hoffa’s home (and probable burial site after he disappeared on the way to lunch with two Mafia members). Mark talked about how federalism is working “the way the founders wanted it to work. People are leaving states that aren’t business- friendly. They’re voting with their feet.” “Hard assets will return,” Mark said. “The Heartland will be back. It will matter again.”

workers” in general, wanted to live there, but those people would want to live in the Heartland only if the Heartland boomed. Mark told me about moving out of Los Angeles and back to Michigan because of the values (moral and material) that the Heartland offers... and because of the anti- business attitude that California maintains. But it was his family that he moved. He moved his company to Miami and now commutes north-south. (Mark inexplicably claims to more than make up for his jet-setting carbon footprint with his hippie, carbon-sequestering goat pastures.) “Why not move your business to Michigan?” I asked. “There’s just a general expectation of where a hedge fund like mine should reside. And it’s because of the people I need to hire,” he said. “It’s about where these hip ‘quanty’ geniuses want to live.” I said, “Maybe if Amazon put its second headquarters in Kalamazoo...” “But it has to be cool to work for Amazon.” Mark noted, however, that Kalamazoo does have a craft beer – Bell’s. He also noted, “Be careful what you wish for.” And true, a Heartland overrun with Seattle sensibilities would take the heart out of the place. But in Mark’s view, Heartland difficulties run deeper than the location whims of talented people. The problem is that Heartland assets are hard assets – a wealth of land, infrastructure, and workforce.

American Consequences 31

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