Friday, April 11, 2008

The Swiss and American Growth Story

The last week was extremely busy so writing after a big pause. I would be leaving for New York on Sunday so before I do that let me elaborate the points on the reasons of growth in Switzerland (some points of the analysis holds for many European countries) and briefly discuss growth of US. I know I am unable to discuss about options trading and China story, probably my next article would be about them if something more interesting doesn't strike me. So here we go.........

Two countries that gained tremendously in the watershed event of WWII were US and Switzerland

America gained tremendously as result of influx of great minds from Europe, no amount of physical capital can match the influx of high influx of human capital, its simply invaluable (almost like a call option with limited downside and unlimited upside) , no one can tell the value of the idea or business venture started by some crazy nerd today whereas in case of pysical capital we know the number printed on the note!! So these great minds from Europe (particularly Jews) entered the US shores and made America , powerful and also changed the face of the planet. Einstein discovered general relativity, Goldman started an organisation that later came to be known as Goldman Sachs.

Back during the period of WWII, Switzerland chose to remain neutral in the global conflict. Unlike US it mainly gained from the influx of physical capital. Wealthy Jews and others kept their money in Swiss banks. Large part of money was never claimed as their owners lost their lives during the war. Now once you have large sums of money it has to go somewhere (to business and assets) and this leads to wealth multiplication over time. This is what has given rise to UBS, Credit Suisse. Don't fool yourself in believing that they are big because there are a lot of smart people in these organisations (smartness has no correlation with money making and oh! yes UBS just recently devalred losses worth USD 12 billion... smart people). Anyways a few such organisation can change the face the nation that has a population of not more than a millionWith almost 50% of them in active workforce these two organisations employ a very large chunk of population. Also with banks with such lare capital around it propels other internal businesses as well e.g. ABB. So with just a handful of entrepreneurs and large amount of wealth created this nation is a rich nation even though people don't work!!!, shops open at 9 a.m and close at 6 p.m, some restaurants open for not more than 3 hrs!!! well let them carry on this way other nations would surely catch up.

One more important point in development of Switzerland and many other European countries is culture. Well before jumping up and down just read..... I walk out of the airport and call for a taxi, two drivers come up one is an Indian driver and another one is an american, whom would I hire.... well the Indian driver....why? because I feel comfortable thats all, nothing against any country or race...its just a human fallacy. In a similar fashion these European countries have benefited from the influx of investment from global giants (mainly from US and UK) over other economies in aisa, simply because of this reason. All countries in south asia is still poor and so there is no surplus capital to invest. Atleast the countries in Asia Pacific, Taiwan and China have benefited from a rich Japan. So the next time you pick a taxi think about this point.........

No comments: