Throughout 2021, U.S. stock market valuations have hovered near all‑time highs. In June, the unadjusted price-to-earnings (P/E) ratio of the S&P 500 index eclipsed the tech boom record of 2000.1 Many other asset classes have attained, or nearly attained, record valuations as well.
Stratospheric valuations may be partially attributable to the unique circumstances surrounding Covid-19, as depressed trailing earnings combined with optimism about a rebound can inflate simple valuation metrics. But valuations were already high before Covid. The cyclically adjusted P/E ratio has remained above 1929 levels for much of the last few years and is also approaching the peak of 2000.2 Indeed, with the exception of the immediate aftermath of the 2008–9 crash, valuations have remained at elevated levels since 2000 (relative to previous history), despite the fact that this period has been characterized by a financial crisis, weak productivity gains, and ongoing narratives of “secular stagnation.”
The conventional explanation for this prolonged period of high and rising valuations focuses on low interest rates and other accommodative measures taken by the Federal Reserve. Fed policy is undoubtedly a major factor contributing to high asset values, but intense debates over monetary policy have arguably overstated its importance. After all, Japan has implemented even more ambitious monetary policies in recent years, including negative interest rates, yield curve control, and central bank purchases of equities. Yet Japanese stock market valuations are relatively low. The European Central Bank has also maintained low rates, and many European sovereign yields are lower than U.S. Treasury yields, but European equity valuations are not as high.
A more comprehensive explanation would simply state that the U.S. economy is, to a unique extent, organized around maximizing asset values and returns on capital independently of growth—in terms of corporate behavior, financial market incentives, and government and central bank policy. This may seem obvious or even tautological: what is capitalism if not a system aimed at maximizing returns on capital? But the disconnect that has emerged between returns on U.S. financial assets and underlying economic performance—and even corporate profits—over the last few decades should raise deeper questions about basic economic policy assumptions and their theoretical foundations. Insofar as rising asset values are not linked with growth or productivity—and at the very least it is clear that they can diverge for meaningful lengths of time—then not only are different policy approaches required to achieve these distinct objectives, but the larger relationship between capitalism and development will need to be rethought.
Market Returns Inversely Correlated with Growth
Contrary to the conventional belief that stock market returns go hand in hand with economic growth, empirical studies have long shown otherwise. Analyzing data across sixteen countries, including the United States, Jay R. Ritter found that GDP growth and stock market performance were negatively correlated.3 Similarly, a recent National Bureau of Economics Research working paper concluded:
From 1989 to 2017, $34 trillion of real equity wealth (2017:Q4 dollars) was created by the U.S. corporate sector. We estimate that 44% of this increase was attributable to a reallocation of rewards to shareholders in a decelerating economy, primarily at the expense of labor compensation. Economic growth accounted for just 25%, followed by a lower risk price (18%), and lower interest rates (14%). The period 1952 to 1988 experienced less than one third of the growth in market equity, but economic growth accounted for more than 100% of it.4
In other words, the link between equity appreciation and economic growth has been weakened in two areas. First, labor’s declining share of profits means that corporations can grow earnings even in a “decelerating” economy. Second, changes in valuation multiples can have a large impact on equity returns independent of any changes in earnings or overall economic growth.5 As I will argue, firms’ strategies to maximize valuations contribute to the declines in labor’s share of profits as well.
Although the expansion of valuation multiples has attracted comparatively little attention outside monetary policy discussions,6 changes in valuations go beyond interest rates and are often inversely correlated with overall growth. For instance, when capital is being allocated to greenfield growth projects, less is available for share buybacks or other cash returns to shareholders, removing near-term support for valuations.7 Even if incomes are rising and credit is expanding, businesses and households may be liquidating tradable assets in order to invest in more speculative and less liquid projects, depressing multiples on average.
Conversely, a corporate sector dominated by institutional asset managers and executives whose compensation is based on near-term equity returns is highly incentivized to engage in activities intended to expand valuations even if there is no impact, or a negative impact, on earnings. Such strategies include spinoffs that aim to “unlock” value simply by isolating business units expected to trade at higher valuations, or other forms of financial engineering like stock buybacks. At Apple, America’s largest company by market capitalization, operating income has barely changed in the last six years, yet its stock price has more than quadrupled, in large part due to $337 billion in buybacks. At the extremes, such behavior can harm growth by eroding a company’s long-term potential to generate earnings.8 Monopolies, certainly a strong presence in America’s concentrated economy, also tend to attract high valuations while harming overall growth.
Furthermore, during the last few decades, the U.S. economy has experienced a larger shift away from capital-intensive business activities (e.g., manufacturing) toward capital-light sectors (e.g., software and other forms of intellectual property). Asset-light businesses generally command higher valuations even if earnings (or cash flows) do not increase because they avoid the high capital expenditures needed to maintain physical assets; because they can often expand without large incremental capital investments; and because they likely have more flexible cost structures in downturns.
The contrast between recent S&P 500 P/E ratios and free cash flow yields (a metric which includes capital expenditures and other items that do not appear in earnings) is revealing. Although free cash flow yields have dropped significantly in 2021—to levels indicative of historically high valuations—they remained relatively high for most of the period since the financial crisis. This unusual combination of high earnings multiples and high free cash flow yields is consistent with a shift of earnings to asset-light businesses as well as weak capital investment more broadly, which in fact has been observed throughout this period.9 It also suggests that, with growth prospects low and cash returns to shareholders growing in importance, most stocks are increasingly trading like bonds.
An additional consideration is international capital flows. America’s trade deficit (which is not unrelated to its offshoring of capital- and labor-intensive sectors) must be offset by foreign capital inflows. These inflows add further support to asset valuations.
In sum, there are many factors that can cause asset valuations and economic growth to diverge. These factors appear in varying degrees around the world but seem especially potent in the United States, where their maximization has been systematically embraced as a business strategy.
Shareholder Value versus Profits: The Inadequacy of Economic Theory
The separation of asset valuations from underlying economic performance is perhaps the most conspicuous feature of the U.S. economy in recent decades, yet most economists and policymakers have failed to appreciate its significance. They refuse to ask a simple question: what if—instead of asset valuations and growth necessarily moving together—firms are being managed to maximize asset valuations separately from, or even at the expense of, growth, productivity, and other socially beneficial objectives?
Academic and policy discourse, in particular, tends to assume that the growth of asset values is straightforwardly driven by the growth of revenues and profits. This way of thinking is at least as old as Adam Smith’s description of the invisible hand:
As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. . . . by directing that industry in such a manner as its produce may be of the greatest value he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.10
Today, however, any discussion of maximizing the value of production and the annual revenue of society sounds almost as quaint as capitalists naturally preferring to support domestic industry. Corporations instead seek to maximize returns to shareholders (which in practice usually means maximizing the value of the firm’s equity11) and increasing profits is at best a means to that end. While deploying capital to grow revenues and profits may be the most intuitive way to increase equity values, it is hardly the only one. Rather than take the risks involved in expanding operations or developing a new product, it is often far easier for firms to simply reposition or financially reengineer themselves to realize a higher valuation.
Consider, for example, the case of IBM, which plans to spin off its IT infrastructure division this year in order to “focus on high-margin cloud computing.”12 The move is being cheered on Wall Street because it is believed that the two businesses will be worth more as separate entities than as one. In particular, the remaining IBM cloud business should command a higher multiple once freed from lower-margin, slower-growing divisions.
IBM has followed this same playbook for years: “We divested networking back in the ’90s, we divested PCs back in the 2000s, we divested semiconductors about five years ago . . . ,” said IBM’s CEO, explaining the spin-off. As a result of this strategy, IBM’s revenues and net earnings are lower today than they were in 1998. But its stock price and P/E ratio are higher.13 (Notably, the company has also spent far more on stock repurchases than on any investment in its ever-shifting “core businesses” during this period, undercutting the stated rationale for these divestments.)
The point here is not that all divestments are bad or that all integrated businesses are good. The case of IBM does demonstrate, however, that shareholder value maximization (whether in a single firm or the whole economy) does not operate in the simplistic ways theorists usually imagine. Today’s shareholder-driven corporations are not necessarily—or even primarily—motivated to engage in the traditional methods of “growing a business.” Companies are often highly incentivized to pursue financial engineering and valuation multiple expansion, rather than investing to increase earnings. Eliminating profit streams can actually increase shareholder returns when the remaining company trades at a higher valuation—especially if share buybacks or other cash returns feature in the process.
Like Adam Smith, most of the neoliberal economists who promoted shareholder primacy and financialization took for granted that maximizing shareholder value meant maximizing profits and growth the old-fashioned way. Milton Friedman’s famous essay in support of shareholder primacy is titled “The Social Responsibility of Business Is to Increase Its Profits.” Friedman here did not even consider the possibility that firms might prefer financial engineering strategies to increase shareholder value, strategies that avoid the inherent risks and difficulties of growing profits.14 The business school professor Michael C. Jensen was far more sophisticated than the economist Friedman, and he understood shareholder primacy in the more precise terms of maximizing “total firm value.” But Jensen still equated firm value with the “long-term market value” of the firm’s “stream of profits”; he largely ignored the implications of the fact that markets value some streams of profits more highly than others.15
These issues are even more significant, if somewhat less visible, in firms’ internal capital allocation decisions. In theory, firms should invest in a new project whenever the expected returns on the investment exceed the firm’s cost of capital. In practice, however, firms have maintained “hurdle rates” considerably above their cost of capital; multiple studies have shown that hurdle rates typically exceed firm cost of capital by up to 7.5 percent.16 Moreover, hurdle rates have largely remained constant at around 15 percent for decades despite falling interest rates (and thus lowered cost of capital) in recent years.17
From the standpoint of economic theory, this represents an irrational refusal to maximize profits. But with regard to maximizing equity value, it is an eminently rational strategy. Lowering hurdle rates would mean investing in projects that might increase earnings, but which would likely degrade earnings quality. In other words, metrics like return on assets would deteriorate and valuation multiples would probably fall. Avoiding such investments—and instead returning cash to shareholders to further prop up valuations—becomes a preferable approach to maximizing shareholder value even if it forgoes substantial profit opportunities. But if the link between shareholder value and profits is severed, then the justifications for shareholder primacy—and much else in economic theory—collapse.18
“Nikefication”
Lawrence Summers, representing what might be called the neoliberal economics establishment, has resisted these conclusions. Summers agrees that the decline of investment and the stagnation of growth and productivity are major problems in the United States, nor does he dispute—or even discuss—the widening gap between corporate hurdle rates and the cost of capital. He simply argues that these issues are not attributable to shareholder primacy and corporate short-termism.19
In a sense, Summers is right. Notions like “short-termism” imply that these issues are merely behavioral, not structural, in nature. And the separation of asset values from profits and growth, though it may be aided by the logic of shareholder primacy, goes beyond any specific corporate governance regime; it is embedded into firms’ operational strategies. Thus the arguments that Summers adduces in defense of typical firm behavior actually point toward an even more radical critique of contemporary economic arrangements.
Summers argues, for instance, that if shareholder primacy were the principal problem, then phenomena like underinvestment should be most pronounced in publicly traded corporations, which are most vulnerable to shareholder activism. In fact, however, the same trends are observed outside of publicly listed companies. Yet this does not prove that financial market pressures are not affecting public firms’ operations. It merely indicates that many privately held firms are subject to the same pressures. This should not be surprising given the dominance of institutional private equity firms, which are equally reliant upon—and motivated to pursue—strategies to achieve “investment-less growth”20 (to borrow a coinage of Germán Gutiérrez and Thomas Philippon), as well as “growthless asset-value maximization.” This is indeed what empirical analysis of private equity portfolios reveals: a recent Bain report calculated that half of the value “created”21 by private equity since the financial crisis was driven by multiple expansion.22 Another study found that in 54 percent of private equity transactions, revenue growth slowed; in 45 percent, margins contracted; and in 55 percent, capital expenditures as a percentage of sales declined.23
Similarly, Summers cites research showing that greater shareholder power is associated with stronger discipline of CEO pay. But Summers fails to acknowledge the extensive body of research demonstrating that shareholder activism is also associated with declines in investment and operating cash flow, despite increases in capital returns.24 In other words, with or without activist pressure, whether publicly traded or privately held, firms are pursuing asset value maximization strategies that are often inconsistent with operational growth and conventional profit maximization. Regardless of whether management or shareholders are the primary beneficiaries,25 such an economy is very different from what economists imagine it to be.
Terms like financial engineering can imply that any misaligned incentives are limited to firms’ interactions with capital markets. In reality, it is the changes in the structure and operations of the corporate sector that are most significant. Gerald F. Davis has called this transformation “Nikefication”26—named after Nike’s business model, which is based on outsourcing its apparel designs to contract manufacturers, mostly in Asia. Through this strategy, Nike was able to isolate its intellectual property rents from the capital and labor costs of manufacturing, avoiding capital costs and reducing cyclicality (in addition to any other labor, tax, and regulatory advantages offshoring achieved). The benefits of this strategy for firms and investors are obvious, and most U.S. corporations have since reorganized along these lines. Any that resisted faced pressure from activist investors and private equity. Examples now include everything from fabless semiconductor companies to firms like Hilton Hotels, which today mostly owns and manages a brand portfolio, while private equity firms or REITs own the hotel real estate, and operations are outsourced to third-party providers.
The result, as Herman Mark Schwartz explains, is an increasingly polarized economy.27 In the previous, “Fordist” era, the most profitable firms were also large capital spenders and employers. Today, by contrast, profits are sequestered into a handful of comparatively asset-light, low-headcount “superstar” firms—which have few internal opportunities to reinvest these profits. Capital- and labor-intensive firms, on the other hand, are often cut off from profits, and therefore investment capital as well. (Many superstar firms are also monopolies or near-monopolies; as such, they face limited competition and thus have fewer incentives to invest and take risks.28) Over time, many industrial sectors were effectively abandoned in the United States, and production migrated to Asia where manufacturing could still attract capital. Meanwhile, a growing portion of the U.S. labor force has been relegated to low-quality jobs, because most workers have been confined to low‑margin, low-growth firms.
At bottom, this strategy of Nikefication, or the disaggregation of production, is not primarily a strategy for maximizing growth or profits but rather the sequestration of rents, via the separation of revenues as far as possible from capital, labor, and other costs. It is, in other words, principally a strategy for maximizing the valuation of those rents. The economics discipline has still not caught up with this shift.
In theory, the strong cash flows of superstar firms should have been redeployed in new investments. In practice, the process of Nikefication actually pushes most firms in the opposite direction. As a firm increases its returns on capital, its hurdle rates on new investments are likely to rise, as the firm seeks to avoid low-return projects or acquisitions that would harm valuation, especially since competitors are likely improving their capital efficiency metrics as well.
As Jeremy Siegel has pointed out, companies that distribute their cash flows to shareholders typically generate better financial returns than firms that reinvest, even if the latter grow more over time.29 An increasingly powerful and sophisticated institutional investor base is not unaware of this fact, and has a strong preference for cash distributions or buybacks, thus maintaining upward pressure on hurdle rates. Economists, on the other hand, have never internalized Siegel’s findings, which clearly suggest that the theories which apply to profit-maximizing firms may not translate perfectly to shareholder‑return-maximizing (or valuation-maximizing) firms.
And what are the shareholders to do with these cash returns? Economic theory insists that they will allocate capital to firms that need it. But since much of the economy has been organized around the principle of separating profits from capital and labor costs, any remaining capital-intensive firms are likely to be low-return, low-growth, high‑risk, and highly cyclical businesses, unlikely to attract much growth capital. Guided by the financial industry, bidding up the prices of superstar firms or other financial assets often seems to be the only option.30
The Decline of Value Investing in the New Economy
Perhaps Summers’s most unintentionally revealing claim in his defense of the status quo is his assertion that “value” stocks (companies with relatively low valuation multiples) have historically outperformed the market, thus suggesting that shareholders still seek out long-term, conventionally attractive investment opportunities.31 Although this claim may still be true over an extremely long horizon, it is no longer the case over the past twenty-five years. In that time, “growth” stocks have dramatically outperformed value, particularly since the financial crisis: “value funds have returned 624 percent [from 1995 to 2020], while growth funds have returned 1,072 percent over the same period,” according to the Financial Times.32 This shift is indicative of the fundamental changes that have taken place in the economy, and it is worth taking a short detour to explore these developments more fully.
Traditionally, value stocks were said to offer a “margin of safety” because their low prices ensured high earnings and free cash flow yields (and/or strong asset coverage). By contrast, the prices of high-flying growth stocks embedded optimistic assumptions about such companies’ ability to increase revenues and earnings. If an economic downturn or some other event threatened those assumptions, however, then growth stocks could suddenly derate from a high multiple on an aggressive earnings forecast to a low multiple on a pessimistic forecast. In theory, then, value stocks offered higher upside and lower downside because they embedded only modest expectations, implying lower risks of multiple compression and earnings disappointments. As the famed value investor Seth Klarman put it in 1991, “the most beneficial time to be a value investor is when the market is falling. . . . Value investors invest with a margin of safety that protects them from large losses in declining markets.”33
Today, however, the opposite is true. Value has underperformed growth in the last two recessions.34 Although value stocks have suffered lower multiple compression than growth stocks in recent downturns, this was more than offset by steeper earnings declines.35 Value stocks now tend to outperform growth during more exuberant periods, if they outperform at all, inverting value investor dogma. In short, while it may still be possible for stock pickers to achieve outperformance through superior market timing (i.e., anticipating macro rotations into and out of value), any margin of safety has disappeared—and market timing is emphatically not what value investors claim to be doing.
Value investors tend to blame the Fed or government interventions for their troubles: contrary to all evidence, they believe they would perform better if downturns were more frequent and more severe. This is because the doctrine of value investing teaches that a margin of safety is created by buying in at prices below an investment’s underlying or “intrinsic” value.36 Hence many value investors accuse the Fed of maintaining valuation levels far above intrinsic values, thus preventing the emergence of attractive opportunities.
This narrative, however, is a self-serving excuse that obscures a harsher reality. In truth, intrinsic values are the Platonic forms of the financial world. They may or may not be philosophically defensible, but they are meaningful only because they differ from material reality. Whether or not a stock trades below its hypothesized intrinsic value has nothing to do with minimizing downside risk, because failing investments cannot be sold to Excel models.37 Likewise, the fact that discounted cash flow models produce different “intrinsic” valuations under different interest rate regimes is not the reason value investors are struggling.
In reality, low prices create margins of safety only if the underlying cash flows are secure.38 No matter how low a company’s valuation multiple is, it will provide no margin of safety if its cash flows evaporate in a downturn. After Nikefication, however, hyper-cyclical, over-levered, or other highly vulnerable companies are virtually all that is available for value investors, and virtually all that ever can be under the current economic order. In 2020, 20 percent of large public companies in the United States became “zombie” corporations.39 (Again, this matches the findings of empirical analysis: lower multiple compression versus growth stocks has been offset by deeper earnings deterioration.)
The fundamental problem for value investors is that an economy organized around maximizing asset values, independent of operating cash flows, is essentially one that is organized around the systematic elimination of any margins of safety achieved through low valuations. For a company to trade at a low valuation today (i.e., one that is attractive to value investors), it must not only be “out of fashion” or have limited growth potential; it must also have no remaining capacity for “value-enhancing” financial engineering (e.g, adding leverage, increasing buybacks, or spinning out high-quality business units at a higher multiple). Otherwise, management would already be doing those things to prevent it from trading as a value stock. Often, low-priced companies are the discarded, overindebted, zombified victims of previous rounds of financial engineering, or highly cyclical stocks, like certain commodity companies. Either way, such companies will not offer any margin of safety, irrespective of price. Perhaps they could still grow profits with more investment, but by definition the returns would not meet the high hurdle rates of growth companies or venture capitalists, so they are unlikely to attract any new capital. Existing investors, meanwhile, will prefer shareholder returns over earnings reinvestment. As a result, these companies will effectively trade like stocks in bad times and bonds in good times—the opposite of how value investing is supposed to work. This is true across asset classes,40 and would be true even if interest rates rose, because these dynamics are built into firm behavior; they are not merely effects of monetary policy.
On the other hand, the most defensive stocks today are the Big Tech giants, which increasingly trade in line with Treasuries during downturns and exhibit volatility similar to classically defensive sectors like utilities or consumer staples.41 Of course, their margins of safety do not arise from low valuations but from their monopoly positions, strong intellectual property rents, and relatively low capital intensity. Although still called “tech stocks” and commonly perceived as dynamic companies, their cash flows are relatively secure, and they do not need to take serious risks with substantial portions of their capital. More capital-intensive tech companies, like Tesla, still exhibit classic growth stock characteristics and volatility. But “true” value opportunities are few and far between. And even if one happens to emerge from time to time, there are not enough of these investments to fill an institutional portfolio or to drive aggregate returns. Thus as long as firm behavior remains within the current paradigm, the value investing approach will appear increasingly obsolete.
The most celebrated value investor in history is now a former value investor. Warren Buffett evidently saw the writing on the wall early and shifted to a strategy focused on identifying monopolies (or companies with “economic moats”) a few decades ago.42 Others pivoted to activist investing. Value purists like Klarman, however, have posted weak returns for years, now seem to underperform in good times and in bad, and appear either unwilling or unable to recognize the structural shifts that have occurred in the world around them.43
The larger point, though, contra Summers, is that the reversal of value and growth investment performance in recent decades indicates that profound changes have occurred in the operations of firms and financial markets. The relationship between value and growth performance has shifted because the relationship between conventional firm growth and asset value maximization has been severed.
The Asian Development Model versus U.S. Asset Value Maximization
Perhaps the clearest understanding of the U.S. economy is found in China, where officials and the media speak directly about America’s increasing dependence on high asset valuations, as opposed to growth in the real economy.44 China, they say, does the opposite. At the very least, China recognizes that these two outcomes are not the same, while American economists and policymakers assume that they are.
A common summation of the difference between the U.S. and Chinese economies, per Michael Pettis, is that in the United States GDP is an output, whereas in China it is an input.45 In other words, China sets a GDP target and manages the economy to meet it. This formulation may be accurate, but it does not adequately capture the most important issue at stake. Namely, China manages its economy to optimize growth, while the United States manages its economy to maximize asset values and (private sector) returns on capital. China, therefore, has continued to maintain high investment, even with lower returns, to support relatively high growth. The United States, on the other hand, has been content to allow investment to decline and growth to stagnate, as long as asset values and shareholder returns remain acceptable.
These different approaches are not confined to government policy; they also manifest in private sector firms’ behavior. While American corporations and financial investors tend to be obsessed with high hurdle rates and return on capital metrics, Chinese firms give these metrics much less weight in capital spending decisions.46 Research suggests this is true across other East Asian business cultures as well.47 Anecdotally, I have heard accounts of a meeting in which an American hedge fund manager asked the head of a large Asian company what the conglomerate was doing to maximize its return on equity. The response was that some analysts in the company’s insurance division looked at return on equity numbers (presumably when analyzing other companies), but that he and the industrial executives did not consider return on equity in managing the firm. American hedge funds may be appalled by this response, but most Asian companies simply do not ration capital to optimize shareholder returns in the way U.S. firms do. Or, to slightly rephrase Michael Pettis’s analysis,48 America (and the West) views capital as the dearest input, whose efficiency must be relentlessly maximized; China (and East Asia) views capital as the cheapest input.
This is the reason why the East Asian development model interacts so powerfully with American capitalism. Each system maximizes different variables, and in ways that seem highly complementary with the other. In practice, this means that Chinese firms are almost always willing to invest with lower return expectations. The costs may not always be borne by the Chinese private sector—they may be offset by state subsidies, and factors like labor or regulatory arbitrage as well as currency manipulation may be at play. But on the whole, China is willing to accept lower returns in exchange for market-share growth, and perhaps even more importantly, to invest in capital-intensive sectors eschewed by valuation-maximizing Western firms and investors. The outcome, in the eyes of both sides, is a virtuous circle. As China invests in, say, manufacturing sectors beneath U.S. hurdle rates, returns in those sectors (and consumer prices) decline, making American firms all the more eager to outsource and offshore those functions. China increases growth and investment; American firms improve their return on capital metrics and boost their stock prices, benefiting from Chinese subsidies. On paper, everybody wins; the only downside is expanding trade and capital imbalances. (And although the resulting foreign capital inflows reduce the cost of capital in the United States, American corporations retain high hurdle rates and remain net lenders, inflating financial asset bubbles.)
Perhaps because shareholder primacy theories had prepared business executives and politicians to believe that increasing returns on capital was always synonymous with increasing growth and productivity—and because they were generating tremendous wealth from offshoring—U.S. elites were quick to conclude that the deindustrialization of America was simply the loss of “commodity manufacturing.” But that was never entirely true, because the sectors lost were determined by their financial characteristics, not their technological significance. American firms happily shed telecom equipment manufacturing, for example, to pursue higher-return businesses.49 Yet as both the U.S. national security and business communities have since discovered, many enterprises that might trade at low valuations can still have great value, and many “commodity” businesses can prove shockingly difficult to replace. While U.S. firms were shedding competencies to inflate asset values, China was building industrial and innovation capacity. Today, Apple pays Huawei to license its 5G patents.50
Western analysts skeptical of the Chinese growth model insist that it is unsustainable—a claim they have been making for some time (though talk of democratization and China’s “inability to innovate” has mostly faded). But their arguments increasingly evoke a dark irony: all the problems that are supposed to make China’s model unsustainable are at least equally present in the United States. Perhaps China’s model cannot last forever, but it does not have to; it only needs to outlast its competitors.
If China is threatened by high debt levels, so is the United States. If China has had to issue more debt to maintain growth, the Fed has had to buy more debt to maintain asset values—without the growth. China’s productivity may be slowing, but America’s has been weak for years. China’s inequality may be rising, but America’s is still worse. And whereas the Chinese have enjoyed unprecedented improvements in living standards over the last few decades, American millennials are expected to be the first generation in U.S. history to end up poorer than their parents. American foreign policy bloggers speculate about whether China might become more belligerent if the Communist Party faces internal pressure. Chinese analysts reasonably ask the same questions about what America might do as public trust in its institutions hits all-time lows.
With China now the largest economy in the world (by purchasing power parity), talk of a new cold war has intensified. But the analogy does not hold. When American CEOs describe their companies as brands “of China and for China,”51 there is no cold war. America’s entertainment industry is far more solicitous of Chinese public opinion than its own country’s. Nor is it possible to ignore the fact that American oligarchs like Elon Musk treat the U.S. government with visible disdain, but render Chinese authorities the utmost obeisance. While the old script about human rights is still being recited, America’s presumed allies have made clear that the performance will not be allowed to interfere with their economic partnerships with China.52
There is no cold war under such circumstances. Cold wars are led by states, and the American state is subordinate to a comprador oligarchy. This class is deeply reliant on China—some directly for contract manufacturing, many more indirectly to maintain high asset values. China could destroy many leading U.S. firms and fortunes overnight, and has shown no hesitancy to do so with its own tech companies.53 U.S. oligarchs will not tolerate such costs, however, and America has already imposed most of the trade controls on China that it realistically can. To seriously confront China, the U.S. state would first have to gain supremacy over the oligarchs. But if the state were strong enough to do that, the current situation would not have arisen in the first place, and a reasonable settlement with China could probably be negotiated.
Branko Milanović has described the American and Chinese systems as liberal-meritocratic capitalism and political capitalism, respectively.54 Milanović’s terminology is useful in that it reveals the paradox at the heart of contemporary capitalism: For capitalism to remain oriented toward growth and live up to its “Smithian” justifications, the private sector must be subordinate to and take direction from the state. In liberal capitalism or plutocracy, on the other hand, the oligarchs will use their power to resist development. For them, hoarding capital to preserve high returns and asset values is preferable to investing in growth at lower returns—if not always on an absolute basis, then at least relative to the rest of society.55
The Valley of Illusion
Behind every great fortune there is a great crime, as the saying goes. And within every celebrated Silicon Valley company there is also extraordinary self-delusion. The two are not unrelated.
From Steve Jobs and Mark Zuckerberg to Adam Neumann and Elizabeth Holmes—as well as many who never achieved public prominence—Silicon Valley “entrepreneurs” have always been more than business leaders or even innovators; they are gurus and visionaries and prophets. Superficially, the otherworldly self-images of star founders might seem to clash with their cutthroat behavior, as well as with the predatory practices of their companies. It is tempting to dismiss it all as a branding exercise.
But that would be a naïve view. All evidence suggests that star founders’ predatory behavior—and hence their success—was only possible because at some level they sincerely believed they were pursuing a quasi-religious mission. Peter Thiel has said that “a great company is a conspiracy to change the world.”56 But conspiratorial self-awareness is overrated. The best entrepreneur is a cult leader. The cult leader can do “whatever it takes” not in spite of his self-delusion, but because of it.
Had Mark Zuckerberg believed he was merely building a platform for maximizing advertising revenue and profiting from regulatory arbitrage—and one that would inflict tremendous damage on society—he would have sold out long before Facebook became one of the largest companies in the world. Indeed, he probably would not have even made it far enough to sell out at all. Nor would he have been able to motivate so many people to devote their lives to his company. To quote Antonio García Martínez’s (now controversial) memoir:
the militant engineering culture, the all-consuming work identity, the apostolic sense of devotion to a great cause. The cynics will read statements from Zuckerberg or some other senior exec about creating “a more open and connected world” and think, “Oh, what sentimental drivel.” The critics will read of a new product tweak or partnership, and think Facebook is doing it only to make more money. They’re wrong. Facebook is full of true believers who really, really, really are not doing it for the money, and really, really will not stop until every man, woman, and child on earth is staring into a blue-framed window with a Facebook logo. Which, if you think about it, is much scarier than simple greed.57
Likewise, Elon Musk is only able to inspire an army of retail investors, or pull off questionable transactions to bail out related companies, precisely because he is not simply in it for the money.58 The same could be said of Steve Jobs, and it barely begins to describe a figure like Adam Neumann.59
But the greatest delusion of Silicon Valley today—and the most politically consequential one—is the belief that the Valley’s success is attributable solely to its innovative prowess and technological significance, rather than the financial characteristics of software and the perfection of the Nikefication business model. To be sure, Silicon Valley does innovate, but that is not why it dominates the economy today. The pre-software Silicon Valley of Fairchild Semiconductors and its offspring was arguably more innovative than Silicon Valley is now, yet it never produced the outsize financial returns and valuations of today’s tech giants.60 The success of today’s Silicon Valley is more about valuation than innovation.
The chasm between innovation and financial success is best illustrated by another piece of tech industry lore, the story of Microsoft. In 1980, IBM was seeking to enter the PC market and needed an operating system. Fatefully, the company approached Bill Gates and a fledgling Microsoft.61 Gates initially directed IBM to Gary Kildall, who had developed the first standalone operating system. But a series of bizarre and disputed events transpired that prevented IBM and Kildall from reaching an agreement, so IBM went back to Gates. Microsoft then purchased a clone of Kildall’s operating system, repackaged it, and sold it to IBM, which more or less ensured it would become the industry standard.62
Yet the drama between Gates and Kildall is not the most important part of the story. What would prove more significant is that Gates’s contract with IBM allowed him to license his operating system to other PC manufacturers. Microsoft received a onetime payment of $430,000 from IBM, but the licensing fees from other manufacturers quickly propelled Microsoft past IBM and changed the nature of tech innovation forever.63
Previously, hardware had been the most valuable product while software was seen as a commodity. Once the intellectual property rents of software had been separated from the capital costs of hardware, however, it was inevitable that software companies would trade at higher valuations, attract more investment, and come to dominate the U.S. technology industry, while hardware companies withered. The advent of the internet dramatically accelerated these trends, enabling further separation of software from hardware via the cloud. Beyond that, although it happened unintentionally, the capital costs of building internet infrastructure largely fell to telecom companies, allowing internet software companies to profit without having to bear the costs of maintaining much of the physical communications system. The internet also created network effects that would maximize intellectual property rents and facilitate monopolization.
The ideology that arose to explain the explosion of software argued that software innovation was the basis of extraordinary productivity growth and revolutionary improvements in the physical world. This argument was most memorably expressed in Marc Andreessen’s 2011 essay “Why Software Is Eating the World,” which sought to address criticism of the software sector’s seemingly high valuations at the time.64
Of course, Andreessen was correct to claim that software was eating the world, but he had the causation backwards. Software’s high valuations were not the result of its extraordinary technological promise. Rather, the software sector had become the primary locus of innovation because of its high valuations. Its financial characteristics allowed software to attract growth investment while other sectors no longer could.
Andreessen cites Skype’s outperformance of conventional telecom companies like AT&T as an example of software’s superiority.65 But it should not be surprising that Skype could grow faster or garner a higher valuation than AT&T. Skype does not have to build and maintain a physical telecom network—though it would be quite useless without one. In this case, software was not just eating the world, but cannibalizing it. What is surprising is that a highly regarded professional investor like Andreessen has apparently never thought about this.
As for the predicted gains in growth and productivity arising from the software revolution, they still have not materialized.66 Economists at Google have argued that GDP statistics do not capture significant economic activity that is now “free,” and so productivity is better than the numbers suggest. But as Yanis Varoufakis has pointed out, internet companies like Google also benefit from massive “free” capital contributions, in the form of user data and content.67 Thus it is far from clear that productivity is understated, even after assuming a more generous GDP figure.
Indeed, the conceit that financial performance is inherently linked to innovation or technological progress has little basis in fact. The best-performing stock of the twentieth century was not Ford or Boeing or IBM, but Philip Morris.68 Regardless of one’s opinion of tobacco companies, they did not build the great technologies of the “American century.” Nor should internet and software companies’ high returns imply that they are building the next one.
But software’s financial return characteristics have warped both political and capital allocation decisions. The late-1990s tech boom, with its visions of a “new economy,” effectively resolved lingering debates about offshoring more than any economic argument. Moreover, even after the tech bubble burst, capital allocation would be driven by software return profiles. A company seeking growth capital would need to show that it could produce software- or internet-like returns; why would anyone invest in high-risk enterprises for less? (The other option was “safe” financial assets, like AAA-rated subprime mortgages.) “Normal” businesses were at best targets for leveraged buyouts, not growth equity—unless they could market themselves as “tech” companies, as various taxi (Uber), commercial real estate (WeWork), and now even time-share businesses have managed to do, often with disastrous results.69
Meanwhile, innovative and strategically important businesses, like high-end semiconductor and telecom equipment manufacturing, were allowed to wither in this country, along with sectors like machine tools or pharmaceuticals components. Researchers at Yale University have argued that because of these effects (among others), the rise of software and venture capital industries introduces a sort of “Dutch disease” into the economies they dominate.70
By 2020, Andreessen seems to have conceded that software’s devouring of the world did not produce the expected benefits. In an essay entitled “It’s Time to Build,” he laments America’s inability to produce medical equipment and other essentials and calls for new investments in everything from gleaming skyscrapers to manufacturing.71 But his appeal is entirely moralistic; he still refuses to acknowledge the underlying financial dynamics involved—or America’s loss of many technical capabilities as a result of the shift to software. Indeed, even in Silicon Valley, technical prowess outside of software has declined considerably. Private space travel companies are nowhere close to replicating what NASA did fifty years ago. The best semiconductors are manufactured in Taiwan, and China appears to have a lead in developing self-driving cars as well as many other technologies.
Andreessen seems to think that America’s inability to “build” is a moral or political failure, the result of a public sector that “hates our private sector,” as he said in a recent interview.72 In reality, it is an inevitable outcome of the underlying political economy he has profited from—a system that conflates financial returns and valuations with building and growth. (Though in his defense, many of the people in the public sector fail to recognize this distinction as well.)
Illustrating the point, Andreessen in another interview expresses approval of the fact that America shed display panel manufacturing to Asia over the last few decades, which, he claims, allowed America to “[win] CPUs and software and the Internet.”73 Of course, while the United States can still design the best CPUs, it can no longer manufacture them. More importantly, however, America did not have to lose manufacturing industries in order to win software. There was certainly no shortage of capital to pursue both, nor a lack of labor, especially as both industries required less and less of the latter. And even if firms disaggregated hardware and software, these industries did not have to migrate overseas. Instead, America abandoned these sectors because they no longer met the hurdle rates of corporations maximizing their valuations and financial investors maximizing their returns—as well as the fact that the U.S. government, largely at the behest of the private sector, did not protect them from Asian industrial policies. Losing hardware was the choice of financial capital, which preferred software and asset bubbles.
In order to return to building the “roads and trains, farms and factories” of our “forefathers and foremothers,” as Andreessen puts it, America’s economy would need to be reoriented toward growth rather than returns. Unfortunately, this will not be achieved by hortatory essays, but only by closing the gap between hurdle rates and cost of capital, and shifting firm behavior back to emphasizing growth over valuation.
But this will likely require an expanded role for the state, either directly or indirectly, to subsidize or de-risk returns, or otherwise alter incentives. And in today’s America, that would require extraordinary and unprecedented magnanimity on the part of the oligarchs. Andreessen himself shrinks from it, instead arguing for a total retreat into virtualization74:
The Reality Privileged . . . demand that we prioritize improvements in reality over improvements in virtuality. To which I say: reality has had 5,000 years to get good, and is clearly still woefully lacking for most people; I don’t think we should wait another 5,000 years to see if it eventually closes the gap. We should build—and we are building—online worlds that make life and work and love wonderful for everyone, no matter what level of reality deprivation they find themselves in.75
Of course, until Andreessen is willing to part with his real-world wealth and position for a sumptuous virtual environment, such sentiments are astonishingly disingenuous. But they are also unoriginal. Still living in the 1990s, the best American elites can offer today is The Matrix’s “blue pill.” The tragedy is that it doesn’t work.
This article originally appeared in American Affairs Volume V, Number 3 (Fall 2021): 66–85.
Notes
1
“
S&P 500 PE Ratio
,” Multipl, accessed June 22, 2021.
2 “Shiller PE Ratio,” Multipl, accessed June 22, 2021.
3 Jay R. Ritter, “Economic Growth and Equity Returns,” Pacific-Basin Finance Journal 13 (2005): 489–503.
4 Daniel L. Greenwald, Martin Lettau, and Sydney C. Ludvigson, “How the Wealth Was Won: Factors Shares as Market Fundamentals,” NBER Working Paper No. 25769, April 2021.
5 “Is There a Link between GDP Growth and Equity Returns?,” MSCI, May 2010.
6 It is also necessary to acknowledge an important asymmetry: although rising asset values are not associated with strong growth or rising wages, a rapid fall in asset prices will almost certainly trigger a financial crisis of some kind, credit freezes, and distress in the “real economy.” Hence the Fed has been more reactive than proactive—lowering rates after the dot-com bubble burst, amid the financial crisis, and during the Covid-19 collapse—acting to stabilize an economy dependent upon high asset valuations. But it is more difficult to argue that the central bank created that dependence, or to explain why those interventions have failed to produce the desired effects beyond stabilizing asset values, such as increased investment.
7 Ritter, “Economic Growth and Equity Returns.”
8 Julius Krein, “Share Buybacks and the Contradictions of Shareholder Capitalism,” American Affairs, December 13, 2018.
9 Project for Strong Labor Markets and National Development, “American Investment in the 21st Century,” U.S. Senate, May 2019.
10 Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, vol. 1, ed. Edwin Cannan (Chicago: University of Chicago Press, 1976), bk. IV, ch. 2.
11 Current tax policy advantages buybacks over dividends for most corporations.
12 Munsif Vengattil, “IBM to Break Up 109-Year-Old Company to Focus on Cloud Growth,” Reuters, October 8, 2020. It is worth noting that some analysts are skeptical of IBM’s ability to succeed in cloud computing, given the paltry capital expenditures the company has devoted to this goal relative to competitors: Charles Fitzgerald, “Follow the Capex: Separating the Clowns from the Clouds,” Platformonomics, May 24, 2018.
13 Though, notably, stock price and P/E are still significantly off 2012 highs, when IBM began ramping up its buyback program in earnest.
14 Milton Friedman, “A Friedman Doctrine—The Social Responsibility of Business Is to Increase Its Profits,” New York Times, September 13, 1970.
15 Michael C. Jensen, “Value Maximization, Stakeholder Theory, and the Corporate Objective Function,” Business Ethics Quarterly 12, no. 2 (April 2002): 239. Perhaps in the theoretical long run, all equations have to balance, but as the saying goes, in the long run, we’re all dead.
16 Project for Strong Labor Markets and National Development, “American Investment in the 21st Century,” 30.
17 Project for Strong Labor Markets and National Development, “American Investment in the 21st Century,” 30.
18 At the very least, no one should be surprised that conventional approaches to promoting investment and growth, such as cutting interest rates or taxes, no longer seem to work, since they do not address issues of earnings quality or hurdle rates.
19 Anna Stansbury and Lawrence H. Summers, “What Marco Rubio Gets Right—and Wrong—about the Decline of American Investment,” Washington Post, May 31, 2019.
20 Germán Gutiérrez and Thomas Philippon, “Investment-less Growth: An Empirical Investigation,” Brookings Institution, September 2017.
21 A more accurate term might be “captured.”
22 “Frothy Market Masks Margin Compression in Private Equity Investments: What Firms Need to Focus on Going Forward,” Bain & Company, October 22, 2019.
23 Daniel Rasmussen, “Private Equity: Overvalued and Overrated?,” American Affairs 2, no. 1 (Spring 2018): 3–16.
24 See, for example, Mark R. DesJardine and Rodolphe Durand, “Disentangling the Effects of Hedge Fund Activism on Firm Financial and Social Performance,” Strategic Management Journal 41, no. 6 (June 2020): 1,054–82.
25 Consider the recent history of Texas Instruments, as discussed in Ben Hunt, “Yeah, It’s Still Water,” Epsilon Theory, October 25, 2019.
26 Gerald F. Davis, The Vanishing Corporation: Navigating the Hazards of a New Economy (Oakland, Calif.: Berrett-Koehler, 2016), 69–78.
27 Herman Mark Schwartz, “Corporate Profit Strategies and U.S. Economic Stagnation,” American Affairs 4, no. 3 (Fall 2020): 3–19.
28 The concurrent weakening of antitrust regulation—which overlapped significantly with the shareholder primacy movement—also encouraged monopoly concentration and intensified the process of polarization.
29 Jeremy J. Siegel, The Future for Investors: Why the Tried and the True Triumphs over the Bold and the New (New York: Crown Business, 2005).
30 Krein, American Affairs.
31 Stansbury and Summers, Washington Post.
32 Madison Darbyshire, “Value and Growth Investments Gap at 25-Year High,” Financial Times, June 10, 2020.
33 Seth A. Klarman, Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor (New York: HarperBusiness, 1991), xix, 87–104.
34 Katherine Lynch, “Value vs. Growth: Widest Performance Gap on Record,” Morningstar, January 11, 2021; Michael Bell, “Does This Recession Favor Growth Stocks?,” J.P. Morgan Asset Management, January 5, 2020.
35 Bell, “Does This Recession Favor Growth Stocks?.”
36 Klarman, Margin of Safety, 164.
37 Private equity firms, on the other hand, can use these valuation models to hide volatility in their portfolios; see Rasmussen, American Affairs.
38 In theory, asset coverage could substitute for cash flows, but old value investor stories about finding companies trading below net cash value no longer happen in real life.
39 Lisa Lee and Tom Contiliano, “America’s Zombie Companies Rack Up $2 Trillion of Debt,” Bloomberg, November 17, 2020.
40 Value investors used to claim that they could still find unique opportunities in “complex” areas like distressed debt and other special situations, but today there is more capital chasing distressed debt investments than there are distressed debt opportunities.
41 David P. Goldman, “China’s Attempt to Avoid the American Tech Monopoly Trap,” American Affairs 5, no. 2 (Summer 2021): 33–45; Capital Ideas Editorial Team, “Where’s All the Volatility in Tech Stocks,” Capital Group, August 24, 2017.
42 Matt Stoller, “Warren Buffett: America’s Folksiest Predator,” BIG (blog), August 9, 2020.
43 Leanna Orr, “‘I Can’t Believe I’m Saying This, but I’m Passing on Seth Klarman,’” Institutional Investor, August 31, 2020.
44 See, for example, Guo Shuqing, “Promoting the New Development Paradigm and Preventing the Resurgence of Financial Risks (speech, 13th Lujiazui Forum, June 10, 2021), China Banking and Insurance Regulatory Commission; Ding Gang, “Sticking Strong to Industrialization, China Will Win Competition with US,” Global Times, June 30, 2021.
45 Michael Pettis, “What Is GDP in China,” Carnegie Endowment for International Peace, January 16, 2019.
46 Hung Chan, Kamal M. Haddad, and William Sterk, “Capital Budgeting Practices of Chinese Firms,” Journal of Global Business Management 4, no. 2 (October 2008).
47 Kamal Haddad, William Sterk, and Anne Wu, “Capital Budgeting Practices of Taiwanese Firms,” Journal of International Management Studies 5, no. 1 (April 2010): 178–82.
48 Michael Pettis, “China’s Troubled Transition to a More Balanced Growth Model,” New America, March 1, 2011. See also: R. Stephen Brent, “Misunderstanding Investment in the United States and China,” American Affairs 4, no. 4 (Winter 2020): 92–102.
49 Robert D. Atkinson, “Who Lost Lucent?: The Decline of America’s Telecom Equipment Industry,” American Affairs 4, no. 3 (Fall 2020): 99–135.
50 “Huawei to Start Demanding 5G Royalties from Apple, Samsung,” Bloomberg, March 16, 2021.
51 Sara Germano, “Nike Chief Executive Says Brand Is ‘Of China and for China,’” Financial Times, June 24, 2021.
52 See, for example, George Parker and Stephen Morris, “Sunak Insists UK Must Bolster China Ties as Access to EU Markets Declines,” Financial Times, July 1, 2021.
53 See Goldman, American Affairs; Jeanny Yu and Abhishek Vishnoi, “Down $831 Billion, China Tech Firm Selloff May Be Far from Over,” Bloomberg, July 6, 2021.
54 Branko Milanović, Capitalism Alone: The Future of the System That Rules the World (Cambridge: The Belknap Press of Harvard University Press, 2019).
55 Hence national bourgeoisies, in so many cases, are antidevelopment. See also: Alex Hochuli, “The Brazilianization of the World,” American Affairs 5, no. 2 (Summer 2021): 93–115.
56 Peter Thiel and Blake Masters, Zero to One: Notes on Startups, or How to Build the Future (New York: Currency, 2014), 106.
57 Antonio García Martínez, Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley (New York: Harper, 2016), 285–86.
58 Bethany McLean, “‘He’s Full of Shit,’: How Elon Musk Fooled Investors, Bilked Taxpayers, and Gambled Tesla to Save Solarcity,” Vanity Fair, August 25, 2019.
59 Matti Friedman, “WeShtick,” Jewish Review of Books (Summer 2021).
60 Tom Nicholas, VC: An American History (Cambridge: Harvard University Press, 2019).
61 Bill Gates’s mother sat on the board of United Way with IBM’s CEO, facilitating a connection.
62 Andrew Orlowski, “Bill Gates, Harry Evans and the Smearing of a Computer Legend,” Register, August 7, 2012.
63 Sean Braswell, “The Agreement That Catapulted Microsoft over IBM,” OZY, May 28, 2019.
64 Marc Andreessen, “Why Software Is Eating the World,” Wall Street Journal, August 20, 2011.
65 Andreessen, who apparently never tires of talking his book, mentions other investments like Facebook, Groupon, Twitter, Zynga, and Foursquare in his “Eating the World” essay. Is it particularly surprising that these companies have not driven meaningful gains in productivity?
66 Raicho Bojilov, “Indigenous Innovation during the IT Revolution: We Never Had It So Good?,” in Dynamism: The Values That Drive Innovation, Job Satisfaction, and Economic Growth, by Edmund Phelps, Raicho Bojilov, Hian Teck Hoon, and Gylfi Zoega (Cambridge: Harvard University Press, 2020). The lack of productivity growth also contradicts the common refrain that lower overall investment is due to cheaper capital inputs. Of course, cheaper capital inputs were traditionally thought to encourage more investment, but beyond that, if capital had suddenly become much more productive, one would expect to see higher overall productivity. See Weicheng Lian et al, “The Price of Capital Goods: A Drive of Investment Under Threat,” IMF Economic Review 68, no. 3 (September 2020): 509–49.
67 Yanis Varoufakis, “Techno Feudalism Is Taking Over,” Project Syndicate, June 28, 2021.
68 Siegel, The Future for Investors. Includes dividend reinvestment.
69 Hubert Horan, “Uber’s Path of Destruction,” American Affairs 3, no. 2 (Summer 2019): 108–33. What matters in investment decisions is return expectations, not actual returns, which cannot be known in advance.
70 Doris Kwon and Olav Sorenson, “The Silicon Valley Syndrome,” Center for Open Science, August 5, 2019.
71 Marc Andreessen, “It’s Time to Build,” Andreessen Horowitz, April 18, 2020.
72 Niccolo Soldo, “The Dubrovnik Interviews: Marc Andreessen—Interviewed by a Retard,” Fisted by Foucault (blog), May 31, 2021.
73 Soldo, Fisted by Foucault.
74 Incidentally, Andreessen’s remarks make for a striking contrast with Chinese authorities’ critique of the virtual economy and its parasitism of the real economy; see Shuqing, China Banking and Insurance Regulatory Commission; Gang, Global Times.
75 Soldo, Fisted by Foucault.
