A Tree You Can Barely Embrace Began as a Sprout: America's 250 Years Were an Investment Case From the Start

A tree you can barely embrace began as the thinnest sprout;
a nine-storey terrace rose from a basket of earth;
a journey of a thousand miles begins beneath your feet.
In human affairs, we usually ruin the thing just as it is about to succeed.
Be as careful at the end as at the beginning, and nothing will be ruined.
— Laozi, Tao Te Ching, chapter 64 (my own plain rendering; original in the public domain)

These are my personal listening notes on The Meb Faber Show episode released 2026-08-12. This is not a reproduction of the show’s content. For the full picture, please support the original program.

What this episode is about

Meb Faber is the co-founder of the asset manager Cambria, and his podcast has always preferred long-horizon data to this week’s price action. This episode is unusual: it isn’t an interview. It’s him reading from his new book. The book is Investing in America: The Rise of a 250-Year Bull Market, published on the Fourth of July, and it’s a coffee table book — he says so plainly, that they spared no expense on the paper, the printing, the cover, the seventy-odd tables and charts, that you don’t have to read it cover to cover, and that audio doesn’t really do it justice. It costs seventy-six dollars, a nod to 1776, and he says all the proceeds go to the Invest America charities.

So what you actually get here is the introduction plus two sidebars. He sets the tone with two quotes: Buffett’s line from the 2016 Berkshire letter about starting from a standing start 240 years ago, and Munger’s rule that the first rule of compounding is never to interrupt it unnecessarily.

Then he starts small. He recently took his first ride in a Waymo, the driverless taxi service on the streets of Los Angeles. The car was clean, a cheery voice greeted him, there was no awkward small talk, no shame in requesting his favourite tunes, and none of the usual anxiety about a human driver barrelling through an intersection while texting. It felt like the future, he says — and coming from someone old enough to have watched flying cars on The Jetsons as a kid, that’s high praise.

Then he poses the question that becomes the book’s measuring stick. Try describing a self-driving car to an American two hundred years ago, and the reply would probably be: “Remarkable. Pray tell, young sir — what is a car?”

That line doesn’t compare numbers. It measures the kind of distance where the question itself doesn’t yet exist. And the introduction’s real claim comes next: ask Americans today what drove all that migration and most will say religious persecution, freedom, opportunity. Both true, he says — but stop there and you miss the layer that matters. The founding of America is better understood not as a purely ideological crusade but as one of history’s boldest investment projects.

The main points

1. America starts with an investment contract, not a declaration

Long before the United States existed as a nation, its earliest settlements were financed, organised and governed by joint stock companies — which he compares directly to modern venture capital funds: pool capital, spread risk, chase asymmetric upside. Overseas exploration in the late 16th and early 17th centuries was extraordinarily risky. Ships sank, settlers died, crops failed, hostile environments routinely wiped out whole expeditions. No individual could carry that risk, so the answer was financial innovation, not courage. The Virginia Company, chartered in 1606, is among the earliest examples: its investors backed Jamestown not out of idealism but expecting profit — gold, trade routes, land appreciation, monopoly rights. Plymouth had the same shape: investors financed the Mayflower voyage in exchange for future returns from labour and production. Even the famously devout Puritans of Massachusetts Bay operated inside a corporate frame — charters, shareholder governance, capital calls, asset allocation, mostly land. And it wasn’t only the English: the Dutch funded New Netherland and the West India Company, the Swedes funded New Sweden. His summary line is the sharp one: America was not founded despite capitalism, it was founded by capitalism. The people who put up the money were literally called merchant adventurers.

2. The colonies were startups, and most of them died

He maps them straight onto the startup shape: undercapitalised, over-ambitious, operating in an uncertain regulatory environment, dependent on constant reinvestment. Many failed outright. Some, like the Virginia Company, pivoted until they found product-market fit — which turned out to be tobacco. A few scaled spectacularly. What makes this framing useful is that it puts “America” back inside a portfolio: a basket of risky bets, most of which struggled or collapsed, one of which returned on a scale the original investors could scarcely imagine. That’s the shape of a power law, not the shape of an average.

3. The institutions grew because capital demanded them

This is the strongest sentence in the episode and the one I’d copy out on its own. Property rights, contract enforcement, representative governance and tolerance for failure, he says, were not philosophical afterthoughts. They were prerequisites for attracting capital and settlers. The colonies that aligned their incentives best were the ones that survived and grew. That flips the causal arrow: it isn’t that unusually high-minded people built good institutions, it’s that without those institutions nobody would hand over their money or their life. For an investor that’s far more useful than any patriotic story, because it hands you a question you can carry somewhere else, rather than a conclusion you can only be moved by.

4. The market keeps swapping its contents; the only constant is the swapping

After the split from England, the finances had to be reorganised, state debts included. Continental certificates, he says, were the original junk bonds; Hamilton’s Bank of the United States was the first IPO. Amsterdam and London had a two-century head start, but the idea found more fertile soil across the Atlantic. The Philadelphia Stock Exchange was founded in 1790, the New York Stock Exchange in 1792. One stock became ten, then a hundred, then thousands. The composition rotated the whole way: financials and banks first, then industrials, canals and railroads, then the diversified market of today. He calls the one constant the creative destruction of free markets — which quietly contains a warning. Whatever you mean by “holding America for the long run,” the contents of that holding have been replaced in every generation.

5. A hundred dollars into twenty billion — plus the two deductions he supplies himself

He runs the classic demonstration: an enterprising investor who sat under a buttonwood tree and put a hundred dollars into US stocks in 1799 would have left descendants with roughly seventy thousand in 1899, three billion in 1999, and about twenty billion today. To his credit he doesn’t let the number run naked — he adds that the grandkids would have spent it a thousand times over, and that the government would want its share. I did the arithmetic myself (he gives no annualised figure, and doesn’t say whether dividends are included; what follows is my own back-out from his numbers): the first century compounds at roughly 6.8% a year, the second at roughly 11.3%, the last twenty-seven years at roughly 7.3%, and the whole 227-year span at about 8.8%. Which means the miraculous-sounding twenty billion rests on a thoroughly boring number.

6. Two sidebars: a culture of ownership, and a country bought by cheque

The first is called “A Culture of Ownership.” America was founded by immigrants and entrepreneurs, people who crossed oceans not merely to survive but to own land, build businesses and control their economic futures — so ownership got woven into national identity early, and later spread from elite insiders to broad participation through retirement accounts, pensions and individual investors. He gives the numbers: about 60% of US households own stocks, against a third in the UK, 15% in Japan, 14% in the Netherlands. Then comes the line that matters: those three countries weren’t picked at random. They are the other three countries that have held the crown as the largest stock market in the world. The second sidebar is called “America the Speculative Acquisition”: historians estimate that nearly 40% of America’s modern territory was obtained through purchase, from the Louisiana Purchase to Alaska, often negotiated under immense geopolitical pressure. In a very literal sense, he says, America wasn’t just settled or discovered — it was acquired as an investment. He closes the book with J.P. Morgan in 1895: the man who is a bear on the future of the United States will always go broke.

Extended thoughts

1. Divide the twenty billion back down and the episode is selling something else

I like the buttonwood demonstration, but its value isn’t the size of the number — it’s what’s left after you divide it back out. About 8.8% a year over 227 years is not a return that requires genius, and it isn’t even a return that requires picking the right stocks. What’s scarce here isn’t the rate. What’s scarce is the 227 years of not being interrupted.

Which makes Munger’s rule about never interrupting compounding unnecessarily not a slogan but the single genuinely hard input in the whole demonstration. And Faber has already told you honestly why it’s hard: the descendants spend it, the government taxes it. Neither of those is market risk. Both are risks to the holder — estates divided, tax events, families falling out, living expenses forcing a sale at the wrong moment. Any one of them breaks the curve in some generation, and once it breaks, none of the later digits ever happen.

Brought back to your own situation, the test stops being “can I find something that compounds at 20%” and becomes “can this account, this household, this cash-flow structure survive thirty years without being forced to sell at the wrong time.” The first is a stock-picking problem. The second is a question about portfolio structure and how you’ve arranged your life. Putting both on the same chart is, I think, this episode’s most practical contribution.

One footnote on those three uneven century rates — 6.8%, 11.3%, 7.3%. They tell you that even inside the prettiest curve in financial history, there was a full hundred years running below the middle. If your plan needs every decade to hit target, your plan is more fragile than the curve is.

The episode has an obvious built-in limitation: it’s the introduction to a book celebrating a 250th anniversary, the sample size is one, and that sample is the winner. Texts like this naturally write survivorship bias down as causation.

What’s interesting is that the material to argue against it is already in there. That ownership table — a third in the UK, 15% in Japan, 14% in the Netherlands — comes with his own note that these three weren’t chosen at random, that they are the other three countries that have worn the crown of largest stock market in the world. That isn’t just rhetorical contrast. It’s the cleanest available control group: markets that were once number one, that once had their own version of the can’t-lose story, and a crown that has changed heads three times.

So how do you write a narrative like this into a shape you can check your answer against? I’d start by pulling apart the “roughly two-thirds of global market cap” figure, because it’s the one most easily used as a conclusion. Two-thirds can come from two very different places: American companies earning two-thirds of the world’s corporate profits, or the market being willing to pay American companies a higher multiple than everyone else. The first is strength; the second is price. Blended into one percentage they’re indistinguishable, but for future returns they mean nearly opposite things — the more you pay, the less the same strength returns to you. The episode doesn’t touch valuation at all. That isn’t a flaw (it’s an introduction, not a research note), but it does mean we can’t read its conclusion as “so buy now.”

The other alternative explanation worth facing honestly is that 60% ownership rate. Faber reads it as culture: a deep belief that ordinary people should have a stake in economic growth. But in the same paragraph he mentions retirement accounts and pensions — which are not culture, they’re policy design. If the 60% is mostly tax-advantaged retirement accounts turning tens of millions of people into shareholders automatically, then it isn’t a national character you can extrapolate from, it’s a by-product of a policy, and policies change. There is a way to tell the two apart: if it’s culture, direct stock ownership excluding retirement accounts should also lead by a wide margin; if it’s mostly plumbing, that gap narrows a lot. The episode doesn’t make that split, so I’ll stop at the question rather than the conclusion.

3. “Institutions grew because capital demanded them” is a ruler you can take with you

Everything above is about America. Only the third point is about method, so I saved it for last.

If property rights, contract enforcement and representative governance grew because they were what it took to attract capital, then you can turn that around and use it as a ruler against any market, any governance regime: were the rules here designed to make outside providers of capital willing to put money in, or were they designed for something else?

The useful thing about this ruler is that it reads incentives, not declarations. A place can write investor protection into statute, but if the incentives that actually allocate resources don’t require outside capital, those statutes won’t be enforced with much conviction. Conversely, a place that genuinely needs outside money to grow will be pushed toward predictable rules even if its slogans are unimpressive, because capital votes with its feet. The colonial competition Faber describes is the prototype of exactly this mechanism: whoever aligned incentives best raised the people and the money, and therefore survived.

The same logic drops one level down to companies. A company that has lived for years on external capital usually gets disciplined into decent disclosure. A company swimming in cash that never needs to ask you for anything has only self-restraint standing between it and its minority holders. That doesn’t make the second one worse — it means the source of your protection is completely different, and so is what you should be looking at.

One last thread the episode supplies but doesn’t pull: nearly 40% of the territory was bought. An entity that grows mainly by acquisition doesn’t have the same quality of growth as one that grows from within — purchased things come with a price, integration costs, and liabilities that only surface later. Applied to a country that may be too abstract, but applied to a serial acquirer it’s a very concrete question: how much of the growth you’re looking at was grown, how much was bought, and was the price any good?

The second half of that Laozi chapter matters more than the first. Everyone can recite the nine-storey terrace rising from a basket of earth. The warning comes after: in human affairs we usually ruin the thing just as it is about to succeed — be as careful at the end as at the beginning and nothing will be ruined. This episode spends 250 years on the baskets of earth. Munger’s rule about not interrupting is saying the same thing.

Worth reading next

The original Meb Faber Show episode — searchable on any major podcast platform; for the full picture and the book itself, please support the original program and the book
Tao Te Ching, chapter 64 — source of the opening quote, public domain, full text with commentaries at the Chinese Text Project (ctext.org)
Berkshire Hathaway’s annual letters (berkshirehathaway.com) — the 2016 passage quoted at the top is free in full on the official site; worth reading in the original rather than in summary
The Library of Congress and the National Archives (loc.gov, archives.gov) — the Virginia Company charter, colonial-era documents and Louisiana Purchase papers are public and searchable
Household finance surveys from central banks and statistics agencies (for example the Federal Reserve’s Survey of Consumer Finances) — the primary source for verifying “60% of households own stocks,” and for splitting out direct ownership excluding retirement accounts
World Bank and World Federation of Exchanges market capitalisation data — the raw source for “about two-thirds of global market cap” and how that share has moved over time
Long-run cross-country return studies (for example the Dimson, Marsh and Staunton work) — built specifically to handle survivorship bias and cross-country comparison, which is exactly the control group this episode is missing

Disclaimer: This article consists of personal listening notes and study notes. It is educational content and does not constitute investment advice, an offer, or a solicitation. Any companies, markets or countries mentioned serve only to explain the context of the episode’s discussion; no specific security is recommended and no price targets are given. Figures and claims are largely drawn from the episode and the author’s own views; the annualised return figures are my own back-calculation from the numbers given in the episode and were not stated or confirmed by the show. The rest has not been independently verified item by item, and I have tried to flag sources and uncertainty in the text. Investing carries risk, past performance does not indicate future results, and you should judge independently according to your own financial circumstances and risk tolerance, consulting a qualified professional where appropriate. Copyright in the quoted material belongs to the original program and the book’s author; listening to the original and supporting the book is encouraged.

Raw Markdown

This article is an educational discussion of investment method. It is not advice to buy or sell any individual security, offers no target prices, and does not analyze any current holding. Investing carries risk; make your own decisions or consult a qualified professional.