For the past 20 years that I have been investing in the stock market, I’ve learned from numerous finance books and blogs that the best way to grow and preserve capital is to diversify across different types of securities (bonds, stocks, cash, etc.) and, within the equity portion of the portfolio, to diversify globally.
Forget about Bonds and other investments, focus on stocks
However, I soon realized that if I wanted my portfolio to grow faster, the best approach was to forget about bonds, cash, gold, and other esoteric securities and focus exclusively on stocks.
When it comes to stocks, everyone will tell you that you should invest globally, invest in various geographic regions. Buy some U.S. stocks, some Canadian, some European, etc.
But for the past 10 years, I’ve noticed that my U.S. holdings consistently outperform my investments in other regions.
At first, I thought this might be due to a temporary cycle that happened to favor the U.S. However, more than ten years have passed, and the U.S. continues to outperform all other regions.
So, the question is: Why?
The U.S. Entrepreneurial Spirit: Innovation, Risk, and Reward
Many people would attribute this to factors like natural resources, work ethic, political stability, the legal system, or Protestant work ethics.
I believe the primary reason is the culture, the innovative spirit of the U.S., and the willingness of its entrepreneurs to take risks, fail, and try again until they succeed.
I think the U.S. was colonized by risk-takers—people who self-selected as adventurers, willing to risk their lives and abandon the status quo in exchange for the opportunity to find riches. Failure became an everyday event that didn’t deter new volunteers from giving it a try. Many people failed repeatedly, but those who succeeded, succeeded big.
Europe and Asia, on the other hand, also have natural resources, political stability, and strong work ethics, but they view failure differently. In many of these places, failure is seen as shameful. If you fail once, that’s it—people won’t trust you anymore. This creates an environment where most entrepreneurs are afraid to try. And if they do try and fail, they’re unlikely to try again—unless they come to the U.S.
The U.S. attracts both capital and talent, and the result is prosperity and innovation.
Historical Parallels: From Ancient Empires to Modern Economic Leaders
Other civilizations have experienced similar levels of success in the past, and their dominance often lasted for centuries.
The Roman Empire’s economic dominance, for example, lasted from the 1st century BCE to the 5th century CE.
Florence became a major financial and cultural center during the Renaissance, dominating the world economy from the 14th to the 16th centuries.
During the Dutch Golden Age, Amsterdam became one of the richest cities in the world due to its dominance in global trade, finance, and shipping. It was home to the first stock exchange and became a major banking and financial hub, making Amsterdam the world’s strongest economy in the 17th century.
London became the financial and political capital of the British Empire during the 19th century and was also the birthplace of the Industrial Revolution.
And now, since the end of World War II, the U.S. has become the world’s financial leader. Since the Bretton Woods Conference in 1944, the U.S. dollar has been the global currency.
Silicon Valley: The World’s Largest Wealth Generator
Silicon Valley is the largest wealth generator in the world, home to companies like Apple, Google, Facebook, Nvidia, and Tesla, along with thousands of startups.
New York City is home to Wall Street, the center of global finance, and the New York Stock Exchange (NYSE), the world’s largest stock market.
Los Angeles is the global hub of the entertainment industry, particularly in film, television, and music. Hollywood generates significant wealth through content production and distribution, and major studios and media companies are based there.
The Enduring Economic Leadership of the U.S.: Lessons from History
Historically, countries that have become economic leaders have retained their leadership for centuries. I believe that with the rise of artificial intelligence and other innovations that are difficult to even imagine today, the U.S. will maintain its leadership position for at least another 50 years.
The U.S. productivity outshines every body else.
The Future of Global Economic Leadership: Why the U.S. Still Leads the Way
In the future, other countries might eventually take over that leadership role, but if that happens, and if we’re still able to move our money from country to country, we investors will be able to start shifting our capital from the U.S. to that next emerging leader. For now, though, consider this: People are risking their lives to get to the U.S. They aren’t risking their lives to go to China, Russia, India, or any other country. So I think keeping my money in the U.S. is a safe bet.
Previous opinion posts