10 Ways to Think About America
The systems that built America’s success now trap it in dysfunction
The Trump administration’s recently released National Security Strategy has surprised both commentators and allies. It names Europe as a primary threat, sets out a sweeping agenda to reshape allies’ politics and societies, and signals ambitious goals. Yet, as Henry Farrell noted in an essay published yesterday, the US government lacks the institutional capacity to implement these plans. The priorities outlined cannot be executed coherently, and attempts to do so risk contradiction, confusion, and strategic misfires.
This disconnect between ambition and execution is not unique to foreign policy. It reflects a deeper feature of the American system: the mechanisms that once attracted and concentrated talent and capital in support of innovating and building now trap them in place, while the structures necessary to coordinate and build effectively remain underdeveloped or broken. Over time, this has produced extraordinary innovation, wealth, and global influence—but it has also created a “lock-in” that impedes adaptation, industrial expansion, and coherent national action.
In this week’s edition, I explore ten ways to think about America’s structural dynamics—from its role as the ultimate destination for people and capital to the constraints on industry, energy, and finance, and the policy and fiscal pressures that define its current era. Taken together, these lenses show why the US continues to innovate, why it struggles to build simultaneously, and why strategies for much-needed change are often blocked by coordination failures at the system’s core.
1/ America is the ultimate destination for people
Back in 2020, as I was dedicating myself to understanding the essence of America, I wrote an edition of this newsletter framing the US as the “final destination.” Unlike Europe, where people always retain the option to leave and return, the US is a place you move to with the intent—or necessity—of staying. Bridges are burned, and the system expects permanence.
The scale of America helps explain why this worked for so long. As an old English teacher of mine once said, the key to understanding the US is that it’s a very large country. Specifically, there is physical and cultural space for people to live apart from one another, forming small communities of like-minded individuals, all under the same flag.
As always, Albert Hirschmann’s famous framework of Exit, Voice, and Loyalty is a useful lens for this dynamic: Americans can rely on voice—speak up, protest, or dissent—without blocking others from living their lives. Loyalty is deeply embedded in national life through symbols, institutions, and rituals, from the pledge of allegiance to civic narratives of shared destiny. Exit, by contrast, is unnecessary and therefore made difficult: the country is large enough, and opportunities plentiful enough, that most people never need to leave.
The Godfather, a story about immigrants in America, illustrates this well. Young Vito arrives seeking a new life. Later, Michael goes to Sicily, briefly reconnecting with the motherland, but the scale of opportunity in the US makes going back pointless. For the Corleone family, as for anyone else, America is the land where you stay, where you build, and where you are pulled in—sometimes into paths you did not expect, but paths you cannot escape.
Over time, this American lock-in became institutionalised—deeply embedded in law and policy. US taxation exemplifies it: citizens owe taxes no matter where they live, and formally renouncing citizenship is costly and rare. Historically, this generated immense benefits: immigrants who treated America as a final stop worked hard, took risks, founded businesses, and staffed new industries.
Today, however, the system is under strain. As Noah Smith has been discussing recently, social media has collapsed the buffers that once allowed Americans to coexist relatively peacefully, turning voice into constant conflict. Loyalty has weakened as a result, yet exit remains almost impossible because lock-in is a pillar of American society. The result is today’s America: a society designed to be a final destination, now struggling under the pressures of dissent and division, unable to find an escape.
2/ America is also the ultimate destination for capital
Just as America is a final destination for people, it also functions as the ultimate destination for global capital. As I wrote earlier this year, the US operates less like a conventional nation-state and more like the world’s largest investment firm—what I then called “America Capital Partners”.
Trade deficits, often seen as a liability, are in fact a deliberate feature. When Americans import goods, dollars flow abroad. Foreign entities—in China, Germany, or Japan—must then decide where to store those dollars—and they invest them back into US Treasuries, stocks, and real estate, effectively recycling capital into America’s economy. In this system, the US captures value much like a private equity firm: the “management fee” comes from mild dollar depreciation and inflation, while the “carried interest” emerges through asset appreciation and dominance in finance and technology.
This creates a powerful feedback loop. Capital inflows make the US the world’s investment destination of last resort, pushing domestic investors toward riskier ventures that fuel innovation and growth. Foreign nations, acting as America’s “Limited Partners,” gain safe returns while the US secures the funding necessary for government operations and new industries at low cost.
Yet the system is fragile: credibility, transparency, and continued trust in the dollar are essential. As with America as a destination for people, the US must remain the most attractive place to invest—otherwise, global capital could find an exit, and the model collapses.
3/ Talent and capital make the US a factory for innovation
Put these two features together—America as the final stop for people and for capital—and you get a system built to produce new things. The country draws in ambitious newcomers who expect (and are expected) to stay. It draws in global savings that need a home. Most places only get one of these flows. The US gets both, and they reinforce each other. People arrive ready to take risks. Money arrives looking for returns. The result is a place where trying something new feels normal.
Paul Graham captured this dynamic back in 2006 when he wrote that to build a real technology hub “you only need two kinds of people… rich people and nerds.” His point was that these two groups are the limiting factor. If they meet in the same place, “startups condense,” and the rest of the entrepreneurial ecosystem forms around them.
America scaled that idea far beyond any single region. Immigration brings in people who have already taken the biggest risk of all by moving. The financial system channels foreign capital into domestic assets, which pushes investors toward ventures with higher upside. Universities pull in young talent from around the world, and labour mobility lets ideas and skills move around fast.
Innovation still clusters, but it clusters in a country built as a final destination. People come and stay. Capital comes and stays. Founders start companies, successful founders fund new ones, and each cycle attracts more talent. This is the chain reaction Paul pointed to, except powered by global inflows of both labour and capital. What that means is that America’s edge is structural: a system that locks in people and money will produce more attempts at new things, and enough of them will work and turn into wealth and power.
4/ The dollar as reserve currency and financialisation constrain what America can build
America’s system produces innovation at a global scale, yet it struggles to turn ideas into physical production. The US excels at generating new companies, technologies, and financial returns in general, but its ability to rebuild factories or expand manufacturing appears constrained. Why?