In his 1992 book, The Twilight of Sovereignty, the late Walter Wriston predicted the rise of electronic networks and their economic effects, which he summarized in what we now call Wriston’s Law:
Wriston said capital (meaning both money and ideas), when freed to travel at the speed of light, “will go where it is wanted, stay where it is well-treated.”By applying Wriston’s Law of capital and talent flow, you can predict the fortunes of companies (and countries). All predictions about future performance must start with this most basic question: Do companies (and countries) attract money and talent, or repel it?
America’s success for most of its history owes to Wriston’s Law. Ambitious people and investment capital have always wanted to come here. America was a place where merit and investment could be rewarded — not just economically, but socially too. The rise of the American meritocracy after World War II coincided with the decline of Northeastern WASPs in America’s social hierarchies. In the early 1980s, writer Tom Wolfe predicted that Silicon Valley would usually beat Boston’s Route 128 in technology showdowns because Silicon Valley culture elevated the engineer and entrepreneur to higher social status. Thus Silicon Valley was a better magnet of talent.
Times have changed though:
On immigration, America has made it harder for educated and skilled foreigners to enter the country and become citizens. As immigration policy goes, it should be a no-brainer to hand out green cards to foreigners who get college degrees in the U.S.As for capital, well, America’s tax burden is rapidly catching up to Europe’s. I like Europe as well as anyone — as a place to drink coffee and loaf.
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Not so very long ago, America was the destination for capital and talent. Now America is just one country among many competing for these precious resources.
(Hat tip to David Foster’s Photon Courier.)