I subscribe to Marc Andreessen’s substack. I like to read VC blogs when they are engaged and not just throwing something up on the page. The reason for that is because they are always thinking about the future.
Remember, great venture capital investments never make sense in the beginning. They are at the intersection of really stupid ideas that would be super cool if they worked. Hence, when one works a lot of people will say “I would have invested in that at the beginning” when in reality they would have laughed at the entrepreneur and told them it would never work.
This piece by Andreessen today is exactly how I feel about life in general.
Please click the link and read it. I want to focus on free markets in this post.
There is so much there. Each statement can support its own blog post. The running dialogue in America attacks blog posts like this. For example, in the section on free markets I hear from so-called experts that “people are irrational so markets are irrational.” It is a refrain that is repeated by talking heads on television and really popular wealth managers from New York.
Yet, it’s totally 100% wrong.
Marc writes,
We believe markets are an inherently individualistic way to achieve superior collective outcomes.
We believe markets do not require people to be perfect, or even well intentioned – which is good, because, have you met people? Adam Smith: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages.”
We believe central planning is a doom loop; markets are an upward spiral.
Yes, yes, yes a thousand times yes. There are so many myths perpetuated by terrible reporting and terrible logic these days that it will be hard to overcome them.
Here is another one. “Private equity just comes in and robs companies and treats employees poorly.” Chicago Booth professor Steven Kaplan’s research has data and facts that totally blow up that statement but whatever.
Who are the central planners today?
One of the hardest things for intelligent individuals to admit is that they are not smarter than the market. I also think that intelligent individuals tend to look down their noses at others and call them “irrational”. Hence, Behavioral Economics appeals to them.
I remember learning Coase Theorem for the first time in an academic setting. It turns out, I had intuitively known Coase in my gut. But, learning it academically was a hard leap for me.
As someone who has interacted in the freest market known to mankind on earth, the trading pit, I understand why they think the way they do and why it is so hard to grasp that they are wrong.
The free market is beautiful, but it is also brutal. It has consequences. It finds the weakest point in your emotional and psychological make-up and it grinds on it. Free markets push the buttons that make you fearful, and people always run from fear. The free market exposes things, and often in a way that you don’t want to see them. You cannot control them and people love to feel like they have control.
Yet, abandoning the free market is not the way to go. You will feel more comfortable for a while with your price supports, price controls, price mandates. But, the iron laws of economics do not play nice in the sandbox with controls. Eventually, they rebel. When they do, the consequences of trying to control the free market are far greater than the consequences of letting the free market do its thing.
Free markets embrace merit. Central planners do not. Central planners want to figure out how to get more capital to “underserved communities” where free markets allocate capital to the community or the individual, that can create the most with that capital and generate the best return. It turns out, that allocation is best for humanity.
We believe markets are an inherently individualistic way to achieve superior collective outcomes.-Andreessen
Embrace the free market.
Was this title inspired by a certain 2015 film?
Too bad the “modern” Republican party doesn’t care for free trade anymore. Hard to tell the difference between them and the Ds these days.