From: allin
JD Vance, a vice-presidential candidate, emphasizes a deep connection between the poverty he observed growing up and the less innovative nature of the American economy [00:03:17]. He suggests that while there has been significant innovation in software, other sectors of the economy have remained stagnant [00:03:31]. These stagnant areas are largely the heavily regulated parts of the economy, which is where the majority of Americans make their living and run their businesses [00:03:39].
Innovation Beyond Software
Vance advocates for broadening the concept of innovation beyond just software to include sectors like transportation, logistics, and energy [00:03:56]. He argues that a technologically innovative economy is crucial, as a stagnant economy can lead to societal pathologies and a feeling of living in a “zero-sum country” [00:04:07]. When the economy grows slowly (between 0% and 1% annually), it makes the political system “much, much, much more insane” [00:04:33]. Conversely, robust economic growth (4-6% annually) allows different political factions to achieve their goals more easily [00:04:25].
Government Spending and Efficiency
A significant concern raised is the impact of government spending on capital allocation and economic growth [00:12:00]. The government is seen as a competing interest that sucks up capital and is “the least efficient way to grow the economy of allocating capital” [00:12:00].
Vance outlines areas for potential efficiency gains:
- Welfare Functions and Illegal Immigration The government should focus its critical social welfare functions on American citizens who deserve them [00:13:31]. Estimates suggest that between 600 billion is spent annually on illegal aliens through healthcare benefits, Section 8 housing entitlements for children, and Social Security/Medicare fraud [00:13:50]. Redirecting these funds to American citizens would lead to significant savings [00:14:10].
- Government Procurement The government procurement process, especially for military equipment, is described as “really broken” [00:14:36]. Issues include excessive “cost plus procurement” and insufficient “spurrin of innovation” [00:15:08]. Improving efficiency in military procurement could lead to cuts in the American defense budget while making the country stronger [00:15:19]. This would require the executive branch to be willing to confront powerful defense contractors [00:15:36].
Regulation and Economic Growth
To achieve higher economic growth, Vance suggests that the US must recognize it has massively over-regulated several key sectors, including transportation, energy, and home construction [00:40:01]. He believes that significantly reducing the amount of regulatory burden in the “real economy” could lead to substantial growth [00:40:18].
“I really do think that we have to recognize that we have massively overregulation Transportation, over-regulated energy, over-regulated home construction…” [00:40:01]
Repercussions for Venture Capital and Market Growth
From his background as a venture capitalist, Vance acknowledges the challenges posed by current policies, such as Lena Khan’s stance on mergers and acquisitions (M&A), which has effectively “taken M&A off the table” [00:23:46]. He explains that without “singles and doubles” — smaller and medium-sized acquisitions — the venture capital industry faces problems with returns, making it difficult to attract new limited partners (LPs) to funds [00:23:51].
While agreeing that “big Tech” poses a threat to free speech and has become oligarchic [00:24:35], Vance believes that Lena Khan’s anti-monopoly stance goes too far by creating a baseline bias against all M&A [00:25:06]. He argues for a clear distinction between “little Tech” (startups, crypto, small AI companies) and “big Tech” (monopolists like Facebook and Google) [00:25:27]. He sees “little Tech” as increasingly pro-Republican, while “big Tech” tends to direct its resources towards Democrats [00:23:07].
Manufacturing and Self-Reliance
Vance highlights the importance of reshoring American manufacturing as part of economic growth. A critical component of this is opening up American energy production, which benefits sectors like crypto and AI by providing necessary power [00:38:03].
He challenges the historical conceit that manufacturing could be separated from design [00:41:09]. The idea that a product like an iPhone is “designed in Cupertino, California” but manufactured overseas is becoming less true, as manufacturers are improving their design and innovation capabilities [00:41:26]. To build a high-tech, high-growth economy, the US needs “some native manufacturing and some self-reliance” [00:42:02]. This rebalancing is essential for achieving 4-5% economic growth [00:42:10].