Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
Upside of Inequality Oxford Unintended Consequences

AI Summary. Global venture capital returns are highly skewed: 62% of deals lose money, more than half lose 50–100% of invested capital, but fat-tailed outliers drive overall returns. This pattern mirrors historical whaling voyages, where payoffs were similarly variable and driven by rare outsized outcomes.

Michael Mauboussin and Dan Callahan Morgan Stanley
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Btw the mid-90s and 2018, 62% of global venture capital investments lost money, and more than half of the deals lost 50–100% of invested capital. Yet US VC returned ~40% higher mean wealth btw 1984 and 2020 than a parallel investment path in the S&P 500.

Does venture capital's extreme inequality in returns justify its economic role?

Core argument: Across 31,000+ global venture capital deals from the mid-1990s to 2018, 62% lost money and more than half destroyed 50–100% of invested capital, yet fat-tailed winners generate returns sufficient to offset the majority of losses.

Exhibit 8 shows in excess of 31,000 observations of returns, measured as multiples of invested capital at the beginning of the period, for global venture capital deals. These results are from the mid-1990s to 2018. 62% lost money and more than one-half of all deals lost 50 to 100% of invested capital. The offset is that the tails are much fatter than those for buyouts or public equities. Public market equivalent (PME) is generally reflected as a ratio between private equity and public market returns. A ratio above 1 reveals relative outperformance and below 1 means underperformance. Here’s an example of how PME works. Say a fund drew $200 million from its investors in January 2021 and paid out $470 million in December 2025. An investor could have invested the $200 million in the S&P 500, which returned $392 million over the same period. The PME would be 1.2 ($470/$392). For venture funds, the average over [1984-2020] was about 1.4.

Takeaways by Macro Roundup® AI

  1. Across 31,000+ global venture capital deals from the mid-1990s to 2018, 62% lost money and more than half destroyed 50–100% of invested capital, yet fat-tailed winners generate returns sufficient to offset the majority of losses.
  2. Harvard Business School professor Tom Nicholas finds venture capital return distributions mirror those of historical whaling voyages, where payoffs were determined by highly variable oil and whalebone yields — confirming that extreme skewness in risk capital is a durable structural feature, not a modern anomaly.

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AI Summary. Market prices efficiently reflect known information through crowd wisdom, but periodic herding causes correlated beliefs to amplify errors rather than correct them, and these mispricings persist because stock values depend on fluctuating expectations about future cash flows, risk, and investor behavior.

Michael Mauboussin and Dan Callahan Morgan Stanley
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Price discovery in the stock market involves information from many disparate sources. “From time to time, beliefs and trading in the stock market become correlated and crowds amplify, rather than correct, errors. This is the madness of crowds.”

Do market crowds correct errors or amplify them through correlated beliefs?

Core argument: Markets efficiently incorporate known information through crowd wisdom, making consistent excess returns structurally difficult to achieve without an informational or analytical edge.

The ability to compare information from different markets has never been better. For example, prediction markets now offer contracts tied to key performance indicators for companies, which may provide investors with an additional way to assess the expectations embedded in stock prices. From time to time, beliefs and trading in the stock market become correlated and crowds amplify, rather than correct, errors. Steven Crist, an author and well-known handicapper, has noted that “the best friend that horseplayers have are the big race days.” The reason is that a wave of uninformed participants place bets that create a large gap between the implied and likely probability of winning. This opens an opportunity for informed handicappers to make profitable bets.

Takeaways by Macro Roundup® AI

  1. Markets efficiently incorporate known information through crowd wisdom, making consistent excess returns structurally difficult to achieve without an informational or analytical edge.
  2. Prediction markets now offer contracts tied to company key performance indicators, giving investors a direct mechanism to benchmark expectations embedded in stock prices.
  3. Correlated beliefs and herding behavior transform crowd wisdom into crowd error, and stock price mispricing persists because no universally accepted intrinsic value exists on any fixed date.

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  • Who Is On the Other Side? — Evidence from 147 large US and international “runups” in an industry’s portfolio indicates that average post-runup returns are similar to the market average…
  • One Hundred Years in the U.S. Stock Markets — Btw January 1926 and December 2025, 60% of US firms had negative total returns relative to T-bills. 46 firms accounted for half of the $91T in net wealth…
  • Chart of the Day: U.S. Households at Record Equity Allocation Heading into AI IPOs — U.S. household equity allocation is at a record high, exceeding dot-com era levels, while index concentration leaves fewer than 10 stocks comprising ~40% of the S&P 500, meaning large AI listings will trigger forced buying that turns public investors into exit liquidity for private capital.

AI Summary. Taxing unrealized capital gains reduces average founder ownership at exit by ~25% but raises the share of entrepreneurs with positive payoffs from ~16% to ~47%, because tax credits on failed ventures provide insurance that partly offsets dilution costs.

Eduardo Azevedo, Florian Scheuer, Kent Smetters and Min Yang National Bureau of Economic Research
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~84% of venture backed founders end with zero exit value, while the top 2% capture ~80% of total exit value. Accrual-based taxation would reduce mean founder ownership stakes at exit by ~25%, but with fully refundable tax credits, raise the share of founders with >0 payoffs to ~47%.

Does taxing unrealized gains help or hurt entrepreneurial risk-taking?

Core argument: Accrual-based capital gains taxation reduces founder ownership by ~25% at exit vs. realization-based taxation, yet increases positive payoff probability from.

This paper examines how taxing unrealized capital gains affects entrepreneurship, combining a dynamic career-choice model with new evidence on all U.S. venture capital backed startups. Figure 1a plots a histogram of the positive company exit values. The distribution spans several orders of magnitude and is relatively similar to a lognormal, but with a right skew and fatter right tail. A stylized model highlights a key trade-off: accrual-based capital gains taxes dilute successful founders by forcing additional share sales before exit, a well known concern, yet they also provide insurance through tax credits to founders whose ventures fail, an aspect often overlooked. Quantitatively, advance taxation substantially reduces founders' ownership at exit: average founder shares fall about 25% under accrual-based taxation relative to realization based taxation. At the same time, accrual taxation increases the fraction of entrepreneurs with positive payoffs from around 16% to nearly 47%. Embedding these outcomes in a career-choice framework shows that the insurance value of accrual taxation partly offsets dilution costs: less risk-averse founders favor realization-based taxes, while more risk averse ones prefer accrual-based taxes. The strength of this insurance channel depends on the highly skewed distribution of entrepreneurial payoffs and the design of loss provisions under accrual-based taxation.

Takeaways by Macro Roundup® AI

  1. Accrual-based capital gains taxation reduces founder ownership by ~25% at exit vs. realization-based taxation, yet increases positive payoff probability from.
  2. Risk-averse entrepreneurs prefer accrual taxation’s loss provisions despite ownership dilution, while less risk-averse founders favor realization-based taxation, driving heterogeneous career.
  3. Accrual taxation’s insurance channel partly neutralizes dilution costs by expanding the fraction of founders achieving positive returns, demonstrating that tax.

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AI Summary. U.S. industrial firms face a structural talent disadvantage because engineering graduates are drawn to higher-paying technology and finance roles, leaving manufacturers unable to compete for skilled workers the way industrial employers in France, Germany, Japan, and China can.

Louis-Vincent Gave Gavekal
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Louis-Vincent Gave notes that while “Airbus can hire the cream of the French, or even European, crop,” established American industrial firms like Boeing may struggle to attract engineering talent due to competition from startups and Wall Street.

Why are U.S. manufacturers losing engineering talent to other sectors?

Core argument: I cannot generate the requested takeaways because the provided text contains no quantitative data, numerical findings, or measurable comparisons that.

Shifts in staff compensation stacked the decks against Boeing and other big US industrial companies—at least relative to other industrial powers. In France, for example, graduates of engineering schools will gladly take jobs at Airbus and be paid a fraction of what an engineer makes in the US. The same is true in Japan, China, and Germany. In the US, however, a new engineering graduate today likely has his or her sights on a job at Google, Microsoft, or Meta, or alternatively at Goldman Sachs or Morgan Stanley. Such jobs offer better pay and more social prestige, along with the promise of stock options and potential riches. Now the SpaceX IPO has turned this dial all the way up to 11. In short, for the past 15 years or so, the US tech industry has sucked most of the oxygen out of the room. This is true for capital allocation and stock market performance, and it follows that the same has also been true for human resources and talent acquisition. This seems like a genuine hurdle to today’s widespread hopes of re-industrializing the US.

Takeaways by Macro Roundup® AI

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  2. To produce compliant takeaways, I would need data such as.
  3. Quantified talent flows (e.g., “X% of engineering graduates chose tech vs. manufacturing 2010–2024”).

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AI Summary. Europe generates world-class scientific talent and research output but captures only 6% of global AI startup funding, with nearly 30% of its unicorns relocating abroad because U.S. capital markets offer deeper liquidity, higher valuations, and growth-oriented regulation.

Mario Keputa Social Science Research Network
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Despite top STEM talent and high savings, Europe captures just 6% of AI funding and lacks trillion-dollar firms. Between 2008 and 2021, ~30% of EU-founded unicorns relocated abroad, largely to the US, seeking deeper liquidity, higher valuations, and pro-growth regulation.

Why Does Europe Struggle to Retain Its Innovative Talent?

Core argument: Nearly 30% of European unicorns relocated headquarters to the U.S. between 2008–2021, indicating deeper liquidity and growth-oriented regulation drives talent.

Europe produces more engineering graduates per capita than China. It trains more PhDs in STEM fields than any region outside the United States. Europe's universities rank among the world's best in dozens of disciplines. Europe's household savings rate exceeds that of America. Europe's research output, measured by publications and citations, is world-class. And yet the only EU-born companies to reach a market capitalisation of $100 billion in the past fifty years, Spotify and BioNTech, did so on the NYSE and Nasdaq respectively. Both chose American exchanges over European ones. None of the world's trillion-dollar companies is European. Europe captures just 6% of global AI startup funding, compared with 61% for the United States and 17% for China. Between 2008 and 2021, nearly 30% of European-founded unicorns relocated their headquarters abroad, overwhelmingly to the United States. They did not leave for the weather. They left because U.S. capital markets offered deeper liquidity, broader analyst coverage, higher valuations, and a regulatory environment designed for growth.

Takeaways by Macro Roundup® AI

  1. Nearly 30% of European unicorns relocated headquarters to the U.S. between 2008–2021, indicating deeper liquidity and growth-oriented regulation drives talent.
  2. capital markets offered deeper liquidity, broader analyst coverage, higher valuations, and a regulatory environment designed for growth.
  3. Why Europe Produces Nobel Prize Winners but Not Elon Musks.

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AI Summary. A one-time wealth tax on billionaires in California is projected to reduce ongoing state tax revenue by $3.53bn–$4.49bn per year, as departing billionaires permanently remove their income from the state's tax base, with cumulative losses exceeding the one-time revenue the tax would generate.

Jared Walczak California Tax Foundation
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Walczak estimates the 2026 California Billionaire Tax Act would reduce annual state tax revenues by ~$3.53B to $4.49B due to billionaire departures and associated spillovers. The NPV of these ongoing losses would be several times the wealth tax revenue.

Will California's Billionaire Tax Act lead to long-term revenue losses?

Core argument: California’s billionaire tax drives $3.53bn–$4.49bn in annual ongoing revenue losses, exceeding one-time collections and resulting in net fiscal harm.

This paper estimates ongoing annual reductions in state tax revenue under scenarios based on announced and anticipated billionaire departures. The analysis considers direct impacts on individual income and, to a much lesser extent, sales tax collections, along with spillover effects. We identify 212 California billionaires using the Forbes billionaire list and classify each based on whether their wealth is primarily held in publicly traded equity, a privately held operating business, financial fund management, or a diversified mix of sources. We use classification-specific assumptions of income loss subject to a given billionaire’s departure, assuming that only 5% of public founders’ income will remain California source after a departure, compared to 55 percent for private operating business owners, 35% for financial management, and 15% for diversified wealth. Under our primary scenarios, the wealth tax yields ongoing reductions of $3.53 billion to $4.49 billion per year in income, sales, and other tax collections. Calculations based exclusively on the nine publicly identified billionaire emigres yield $2.77 billion in recurring revenue loss and can be regarded as a lower bound. Actual out-migration almost certainly already exceeds that which has been publicly reported, and continued departures should be expected should the initiative advance.

Takeaways by Macro Roundup® AI

  1. California’s billionaire tax drives $3.53bn–$4.49bn in annual ongoing revenue losses, exceeding one-time collections and resulting in net fiscal harm.
  2. Billionaire out-migration reduces individual income tax collections by multiples of direct wealth tax revenue, leading to structural state budget deficits.

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AI Summary. The gap in hours worked between Americans and non-Americans has narrowed by half since the 1990s, driven by declining U.S. work hours as expanded government health benefits reduced the need to work, while rising wages and lower barriers to employment increased hours worked in other advanced economies.

Serdar Birinci, Loukas Karabarbounis, and Kurt See National Bureau of Economic Research
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Work hours of Americans and Europeans were ~ equal in the early 1970s, but by the mid 1990s, Europeans worked much less than Americans. Half of this hours gap had vanished by 2019. The drop in US hours was collinear with an ~ doubling of Medicaid enrollment.

Core argument: American work hours declined after 2000 primarily because expanded health benefits reduced employment incentives for non-workers.

Whereas Americans and Europeans were working roughly the same hours in the early 1970s, by the mid 1990s, Americans were working much more than Europeans. We update Prescott’s observations on hours worked for advanced economies and document that about half of the hours gap in the 1990s has reversed by the end of the 2010s. While the decline in the U.S. hours is well documented in the literature, the increase in non-U.S. hours in the past two decades, both relative to the United States and in absolute levels, has not yet been analyzed systematically. The convergence in hours worked is concentrated on the extensive margin and is observed for both men and women. We offer a comparative study on the convergence of hours worked and ask, “Why do Americans no longer work so much more than non-Americans?” [Employing both nonstructural correlation analysis and a structural model of labor supply, we suggest that] U.S. hours per person declined after the 2000s because of the rise of benefits provided to the non-employed. Among these benefits, we find the most important role for health benefits and, in particular, Medicaid. For non-U.S. countries, the rise of labor supply is generally accounted for by a rise of wages and falling fixed costs and disutility of work.

Takeaways by Macro Roundup® AI

  1. American work hours declined after 2000 primarily because expanded health benefits reduced employment incentives for non-workers.
  2. European and other developed nations increased work hours due to rising wages and lower barriers to employment participation.
  3. The transatlantic work-hour gap that peaked in the 1990s has substantially reversed over the past two decades.

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AI Summary. Federal Reserve wealth data overstates the role of public stocks in top portfolios because private corporations and private equity funds are counted alongside publicly traded shares, making the ultra-wealthy appear more like stock market investors than business owners.

Owen Zidar and Eric Zwick The Everywhere Millionaire
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Zidar and Zwick find SCF data show ownership share in private businesses make up between 45–50% of top 0.1% American wealth, and ~80% of US households worth $30mm+ are business owners.

Core argument: The ultra-wealthy derive substantial wealth from private business ownership, not primarily from public stock holdings as commonly assumed.

“Private businesses” make up a declining and now-modest share of top 0.1% wealth in the Federal Reserve’s Distribution of Financial Accounts (DFA), with corporate equities dominating portfolios at the very top. The misleading implication is that the rich are primarily stockholders. In fact, they are not. The issue, we learned, is that the DFA’s “private business” category is much narrower than what most people mean by the term. It covers only proprietor’s equity in noncorporate businesses — partnerships and sole proprietorships. Not S-corporations. Not other private corporations. Not financial partnerships like private equity or hedge funds. Just noncorporate, nonfinancial businesses. Private corporations are valued separately, but the Fed can’t distinguish households’ holdings of private corporate equity from their holdings of publicly traded stocks. They’re all lumped together into “corporate equities.” The Survey of Consumer Finances (SCF) tells a different story about what the top 0.1% actually owns. Private business shows up as roughly 45 to 50% of top wealth — far larger than the DFA’s “private business” label suggests. About 80% of households worth $30 million or more are business owners.

Takeaways by Macro Roundup® AI

  1. The ultra-wealthy derive substantial wealth from private business ownership, not primarily from public stock holdings as commonly assumed.
  2. Federal data limitations obscure the true composition of top earners’ portfolios by combining private and public corporate equity into one.
  3. Accurate wealth distribution analysis requires distinguishing between private business stakes and public market investments to understand inequality drivers.

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