Short read: Ode to America – A Personal History of American Finance

“Liverpool’s over-dependence on trade rather than production exposed it to economic decline when Britain lost its dominance of world markets in the 1920s and global commerce then slumped during the Depression. Between 1919 and 1939, Liverpool lost 1% of its trade each year to other British ports, particularly London where handling costs were cheaper and imports found a larger market. Unlike New York, Liverpool didn’t sufficiently diversify. The rise of containerization in the 1960s accelerated the decline, and Britain’s entry into the European Economic Community sealed it by shifting the locus of trade south-east.”

Whilst the whole article is worth a read for the various ways American finance underpinned America’s greatness, here is a few reproduced:

First, the role of private capital funded infrastructure: “When the first inter-city railway in the world was laid from (where else) my hometown of Liverpool, it was financed via a private placing: local merchants and mill owners subscribed to 4,000 shares at £100 each. America took the idea and made it bigger. Compared with the $188 million invested in canals from 1815 to 1860, three quarters of which was supplied by state and local governments, the total amount of money spent on US railroads was more than $1.1 billion. It was impossible to raise this amount of capital by tapping the traditional resources of friends and family, so the New York Stock Exchange became a hub. Before the railroad age, a busy week on the exchange might have involved a thousand shares; by 1860, million-share weeks were not uncommon. Railroads still accounted for 60% of publicly issued stock in 1898 and 40% in 1914. Today, they account for around 0.5% of the S&P 500 index but the industries they spawned – finance and retail among them – account for much more.”

The attitudinal difference between America and Britain: “…Britain venerates its cynics while the US venerates its bullshit artists. It’s a good framing of the nations’ divergent attitudes toward ambition and possibility. British cynicism acts as a gravitational force, pulling new ventures back to earth. American optimism propels them skyward, even if it sometimes fuels excess speculation. “Startup founders in the US imagine the range of possible scenarios and pitch the top one percent outcome,” says Monzo co-founder Tom Blomfield, now a group partner at Y Combinator. “On the contrary, many UK investors take an extremely risk-averse view … The approach to business in the UK and Europe feels zero-sum.”

America’s love for the stock market: “Today, around 21% of American households own stocks (33% including funds) compared with 14% in the UK (16% with funds). I sometimes wonder if gambling legislation has something to do with the gap. In the UK, speculative excess has historically played out at the racecourse and in smoke-filled betting shops; with these avenues cut off in the US, the main outlet became the stock market. But it might also reflect America’s greater capacity for renewal. US household stock ownership has now regained all ground lost since the dot-com crash of 2000. In the UK, we remain well below our 2000 peak, still nursing old wounds.”

The marvel of Silicon valley’s risk appetite: “Various reasons have been given for the success of Silicon Valley over the years: government contracts, proximity to Stanford, California labor laws. But what matters most is that’s where the venture capital is and, as well as providing money, venture capital cultivates ties between startup companies that help them flourish. “Without Tom Perkins’s loose ties to his old friends at Hewlett-Packard, Tandem Computer would never have been conjured into being,” writes Sebastian Mallaby. “Without Nolan Bushnell’s loose ties to Don Valentine, and without Valentine’s loose ties to Mike Markkula, Apple might never have become a real business.”