Wrinkles in faith-based investing

I have always eschewed active stock selection, buying instead into random-walk, Boglehead theory. But overweighting domestic stocks is actually a form of faith-based investing: faith that the US will come out ahead. In general this has been a good bet. In the late 70s and early 80s it looked like were were toast, but then we turned out to be more like French toast, enriched by eggy ideas and the sweet sweet syrup of continuously confident fiscal policy. But somewhere along the way this confidence metastasized into hubris.

For now, The Economist cites as basic US competitive advantages over the rest of the developed world productivity growth and population growth, especially via immigration and assimilation. Europe doesn't do the latter nearly as well, and Japan totally doesn't.

But relative to rising Asia and Brazil, an entirely different set of dynamics are at work. Those folks are hungry and competitive, while we are threatened by educational underperformance by Anglos. We have great universities but a bunch of slacker kids. We only have a fixed quantity of very high-end imported talent from India and China, and they are geographically circumscribed to specific regions, and as the balance of economic power shifts the talented ones will be drawn inexorably back to their homes.

We need to do a number of things to be sure they want to stay here, or reverse brain drain will accelerate. We need to maintain the comparative advantage of open and civil society versus the male-dominated and caste and statist constraints of Asia. And we need to kick our own kids' butts into gear.