Issue 14: Aligned Economies
From tech productivity to trade corridors, integration is strategy.
When I was a kid, I spent weekends helping my dad keep an old Chevy running.
It wasn’t glamorous work. We’d pull apart carburetors, trace wires, and figure out what still had life left in it.
What stuck with me wasn’t the car itself but the process. Every fix taught patience, attention, and the value of doing things the right way even when no one’s watching.
This week feels a lot like that kind of work.
Productivity concentration is reshaping the balance of U.S. growth. Data from the Chicago Fed shows that the information technology sector now drives nearly half of total productivity gains despite representing a small share of overall output. This concentration highlights how dependent efficiency has become on a single engine of innovation.
Industrial innovation is not new, but its roots trace back to the early twentieth-century merger wave. Research from Pier Paolo Creanza finds that consolidation once fueled invention rather than stifled it, showing how structure and scale can sometimes expand creative capacity instead of constraining it.
Private market transparency is becoming measurable in real time. Morningstar and PitchBook’s new evergreen indexes allow investors to track private-market performance with consistent benchmarks, turning what was once opaque into something closer to public-market visibility.
Market recalibration is defining the current investor mindset. At the New Private Markets Summit, discussions focused on AI valuations, tighter exit windows, and affordability pressures. The tone reflected a shift toward discipline and realism as capital adjusts to slower growth and higher costs.
I think about that Chevy whenever I see markets trying to find balance.
The people who last aren’t the ones racing ahead but the ones who take the time to keep the engine running right.
📈 BY THE NUMBERS
Tech Drives Most U.S. Productivity Gains
The Fed finds that U.S. productivity growth since the late 1980s has been dominated by the information-technology sector. IT firms make up only about 8% of private-business value added yet account for roughly 45% of total-factor-productivity gains.
Takeaway for allocators:
U.S. growth is riding a narrow wave: if IT slows, the broader economy could lose its main productivity engine. For capital allocators, that concentration means risk and opportunity—diversification or deeper bets on the rails powering digital output.
📡 HEADLINE SIGNAL
AI Exits and Pricing Tensions
At the New Private Markets Summit, investors weighed a slowdown in affordable housing deals and debated how artificial intelligence is reshaping private-market exits. LPs noted that elevated entry valuations and uncertain exit timelines are forcing a rethink on return expectations.
Takeaway for founders:
The shift highlights how AI narratives are colliding with real-world capital constraints. Managers face pressure to balance hype-driven tech exposure with yield from housing and infrastructure, testing discipline in fund allocation and pricing.
📈 BY THE NUMBERS
When Big Firms Sparked Innovation
Studying America’s 1895–1904 merger wave, Creanza finds that consolidation boosted innovation: merging firms produced about six more patents per year and 0.6 more breakthroughs, a four- to six-fold jump. Overall, breakthrough patents rose ~13% from 1905 to 1940, especially in science-based fields.
Takeaway for allocators:
The study flips the usual antitrust narrative: scale once amplified creativity instead of stifling it. It hints that structure and coordination—when paired with R&D discipline, can drive innovation surges, a lesson for today’s AI and deep-tech giants.
📡 HEADLINE SIGNAL
Morningstar Opens Private Index Access
Morningstar and PitchBook unveiled a suite of “Evergreen” indexes built from the PitchBook private-markets database, giving investors near-real-time benchmarks for venture, buyout, and growth-equity performance. The tools aim to bring liquidity-style transparency to an opaque asset class.
Takeaway for founders:
This marks a structural shift toward standardized pricing and benchmarking for illiquid assets. Better data could accelerate tokenized fund products and secondary trading, critical for founders and allocators seeking fairer valuation rails.
Recapping Mexico City
This past summer, I joined the US–MEXA Alliance and the Secretariat of Economy in Mexico City for a series of meetings with governors, business leaders, and investors.
The conversations focused on how trade, manufacturing, and infrastructure investment can strengthen the flow of capital between Mexico and the U.S.
I’m grateful to have been part of those discussions and to see the level of coordination happening on the ground. The openness and shared sense of purpose stood out most.
Mexico is stepping into a pivotal role in regional growth, and I believe what we started in those rooms will continue to build into lasting partnerships.
I’m looking forward to supporting that momentum and helping connect capital to the people driving it.
That’s it for this week.
Thanks for reading the latest Dispatch. If you made it this far, you’re part of the shift. 🌊
See you next week, with more plays worth tracking.
— Thomas
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