Had Huang known three decades ago what he knows today, he never would have founded Nvidia, one of the world’s most valuable companies. “The reason is simple,” Huang said recently. “Building Nvidia turned out to be a million times harder than I expected. If you realized the list of all the things that will go wrong, the challenges you’re going to endure, and the pain and suffering, vulnerability, embarrassment, and shame you’re going to feel, nobody in their right mind would do it. That’s the superpower of an entrepreneur. They don’t know how hard it is going to be. He didn’t know that the original business plan had no chance of success, how many times he would fail, and how much he didn’t know. “You’re always on the way to going out of business. If you don’t internalize that sensibility, you will go out of business.”
- Date Posted:
- December 11, 2023
Let me emphasise what I am saying so that I am not misunderstood. I am saying that rates are likely to be low in the long run, compared to the historical average of recent decades, but not as low as immediately before the pandemic. That means we should not expect rates to be very much lower than they are today, a little lower, but not very much. An example, which is not a prediction but is meant to illustrate the point, is that a nominal r* of around 3.5 is probably not a super crazy assumption. With the 10-year Treasury bond currently trading at just over 4%, this implies slightly lower rates than today, but not much lower rates. At the same time, I think there is in particular one thing that could alter this picture: very high debt levels. I think exploding debt, particularly in the US, is probably the biggest risk to the base case scenario of low equilibrium interest rates in the future.