Higher-Order Capital Flight, or, Will Apple be the First Company to Leave America?

Hi! How’s everyone? Welcome back old friends, welcome new ones, and here’s a tiny Snowy hug for all.

Today we’re going to discuss a topic many of you have been asking me about in sessions. I’m going to teach you how to understand the economy, American collapse, where it all goes, and what it means for your money, career, life, and future.

We’ve been talking lately about the idea of capital flight. The daily gyrations in the stock market aren’t the news you should be paying attention to much, though of course nobody likes seeing Donald Trump melt down their life savings. The bigger picture is that capital is fleeing America, and will continue to, as it decays into what’s looking a lot like a failed authoritarian state.

Think of the way air leaves a punctured tire. Now think of that tire being punctured in a hundred places. That’s what happens when autocrats attack universities. The rule of law. The economy itself, with tariffs. And even individual corporations, not to mention people, themselves. That’s why America’s asset prices are all tumbling, and will continue to.

But let me shade in this picture with a dramatic example, which I’ll come to—Apple. First though, let me teach you a bit about capital flight, and what it really means.

Higher Order Capital Flight

When we speak about capital flight, you imagine I mean money. And that’s correct. Asset prices are tumbling in America—in more or less all categories, for dollars, bonds, stocks, and soon enough property—as a result of capital flight.

But capital flight isn’t just money. Money’s just one form of capital.

What’s another? “Brain drain” is already underway. Trump and his minions have fired talented researchers in droves, and smart countries are picking them up as fast as they can. That’s human capital flight.

Meanwhile, plenty of people, and many of you in sessions, are making exit plans. Or at least thinking over exit options. You’re thinking about taking your career, intelligence, education, elsewhere. That’s human capital flight, too. It’s also social capital flight, when you take your relationships, networks, families, and so forth, with you.

And some of you are making at least financial exit plans, which is partly what my model portfolio is about, to help guide you (we’ll launch it soon.) That’s financial capital flight on an individual level, and if enough people do it, on a systemic level.

So all the above are forms of capital flight.

And this is how nations grow truly impoverished, or why some never really get rich at all. Capital flees. In all these forms. Money, true, but also talented people, educated people, entire fields of them, sometimes, as they did during the 1930s. When this happens, nations are scarred. They’ve lost their potential for wealth creation over the long run. And their financial markets don’t work very well after that, and grow more and more unstable and fragile. Like America’s are.

But there’s one form of capital we haven’t discussed so far.

Will Apple Be the First Corporation to Leave America?

There’s a question I’ve been raising with many of you in sessions. And you’ve raised with me, before I do, sometimes.

Will Apple be the first major corporation to…leave America?

Now, some of you are going to think: “why would they do that? They’ll be hit by the tariffs then!” This is a measure of how much Donald Trump has already messed with your head, because of course, the point is that they’re being hit by the tariffs as we speak.

Don’t let Trump mess with your head. Understand that it is Americans who will pay the price for this lunacy, in real terms, with dollars. And not just individual Americans, but also American institutions, like corporations.

But Trump seems to have a certain vendetta against Apple. He regards it as an enemy, in existential terms. And so, strikingly, he’s threatened to level a 25% tariff against just it.

Many things Trump is doing are unprecedented. But this one is in a league of its own. Nuclear economic war with the world, eviscerating American government, authoritarian-fascist politics, and so forth. And yes, all those things matter, but we’ll discuss them further in other posts. Here, I want you to understand just how remarkable it is for a President to attack an individual corporation.

And not just any corporation. But in many senses, America’s most successful, and maybe the world’s. Apple was the world’s first trillion dollar company, if you didn’t know. Most people think to themselves, and sometimes say to me, “my money guys have done well for me over the years.” The truth is that the lion’s share of the returns in the American stock market have come from… Apple.

Now, that’s not a paean to Apple, which, sure, is a company that I admire. I’m trying to teach you something.

When Presidents attack the most successful companies in their economy, which also happen to be the most successful companies in the global economy, that is a Very Bad Idea.

But not just in the way you think. Because I don’t mean rhetorically attack. I mean financially and economically attack. Let me explain.

What are those companies likely to do?

If you were Apple, these would be your options. Stay in America, and face these attacks, directed now not just at the economy in general, but at you in particular. Staying in America would cost you maybe 25% of your profits, which is what the special tariff Trump wants to hit Apple with is.

And if you left, you’d have leverage.

At the very least, you wouldn’t face that special tariff, because, well, you wouldn’t be an American company to begin with. Sure, Trump might be able to invent some pretext to target you, but that’d be on pretty shaky legal ground, because, again, you wouldn’t be American in the first place.

More than that, I’d bet any country on the planet would welcome you with open arms. And say something like, let us make up some of that damage that Trump’s inflicted you, with this incentive or that deal.

Let’s keep going. After a while, brain drain would mean that if you wanted to hire the world’s most talented people, and put them to work on the world’s most cutting-edge projects, which require, wait for it, science and art and truth and other pillars of modernity, it’d be much easier outside the country whose brain has been drained.

And if you wanted to cut a special deal with Trump himself, then it’d be far easier to do from outside the country he controls. Because if you’re in it, of course, what deal can be cut at all, since you’re powerless to begin with? That’s the strategy end of things.

So. In terms of strategy, finance, people, capital, access to the world, its markets, you’d be better off outside. Eventually, at least. See the point I’m making, which I’ll now sum up.

Risk Incentivizes Exit

The more that Trump singles out companies like Apple for special punishment, the more likely they are to leave. Formally, risk incentivizes exit.

And I don’t think that this is in any way theoretical. I’ve helped run one of the biggest companies on the planet, at C-level. I can all but guarantee you right now that these discussions are happening at Apple this very instant. And not just Apple, but plenty of other major companies, too. Because the risk is now growing far too serious and grave, when Trump is willing to single them out, and the best option to manage it is simply to leave.

Companies aren’t citizens of anything. They are just multi-national corporations. Yes, they’re incorporated in certain places, and chartered in certain places. But that can be undone and redone in a flash, and it often is. MNCs have armies of lawyers doing exactly all this every day, for all kinds of reasons, to minimize taxes, to create subsidiaries, to form joint ventures.

Don’t kid yourself into denial here.

Companies are likely to start leaving the more that Trump abuses them. They are already exploring exit plans right now.

America’s historically best-run companies, Apple, Nike, etcetera, are almost certainly creating exit options right this second. Maybe not in a binary way, but certainly, at least, in a gradual fashion. We’re going to be headquartered in Vancouver, Paris, and San Francisco. Our key stock market listings will be all over the world. And so on.

(By the way, European companies do this all the time. It isn’t new, and it isn’t remotely controversial—it’s just that American companies have never had to think about it.)

Now. The first company to leave will set a precedent. It will create a cascade effect. It will make it easier for the next, which will make it easier for the next. Eventually, this will become a legal and financial discipline in itself, just like M&A is, for example. The point is that these are dominoes just waiting to fall.

Because companies have to manage risk. Before, they, like you, were in a world of micro risk, and that means, what kind of iPhone or sneakers will sell best next year. But now, they must manage macro risk, which is: how much will Trump punish us just for existing? And the best way to manage that risk is very, very simple: don’t be at his mercy anymore.

So there’s very little doubt in my mind that companies will begin to leave America. After all, talented people already are. Money already is. You’re exploring exit options as we speak, and none of us haven’t thought about them, at least not those of us who are smart.

Those are forms of capital flight, remember? Now let me teach you the lesson.

Capital Flight Goes From Lower to Higher Order

Capital flight proceeds from lower to higher order forms.

Money is the lowest order form, because of course, it’s the easiest thing to liquidate. Then comes “brain drain,” or human capital flight, because people uprooting themselves is harder. Then come entire fields, or domains, or areas, which is systemic capital flight.

And finally comes institutional capital flight. When entire institutions realize they can no longer exist at all, in the autocratic or authoritarian-fascist shell where once there was a vibrant, healthy, modern democracy. The price is just too high, and the risk can only be managed by exit. That is high-order capital flight.

In America’s case, the highest order capital flight will be the jewels in its crown. America’s a capitalist society, and it’s most valuable assets are its corporations. Without them, it has very little at all (America isn’t exactly renowned for it’s safety nets, culture, or quality of life, after all.)

They too will have to exit, if Trump keeps punishing them. And as they do, Americans will grow poorer permanently, but this time, not in little drips and drabs, but in sudden earthquakes. If and when an Apple or Nike leaves, a company that’s powered the lion’s share of gains in the stock market, which millions upon millions of retirement portfolios were based on—that’s wealth destruction, for good, at a catastrophic level.

What are the next generation’s portfolios going to be based on, then? Where does growth in an economy come from, that’s just a shell, all the highest order capital having fled?

This is how countries destroy themselves economically and financially.

This is where America’s heading.

Don’t kid yourselves, and don’t for a second believe the average money manager who reassures you half-heartedly that authoritarianism has no economic or financial price. That’s never been true, and it’s not going to be true for America.

I’m not saying Apple’s going to leave tomorrow. I’m not even saying it’s going to happen this year. Nor am I saying that it’ll be binary. But I am saying that I wouldn’t be surprised to wake up to the headline: Apple decides to leave America.

Because I am saying that this is a risk now. And it wasn’t before. That America’s most innovative and interesting and powerful companies decide to leave, because, in the end, authoritarianism is just too costly.

Risk incentivizes exit. For all forms of capital. More and more people are considering exiting every day now. More and more money is exiting that every day. And so will more and more institutions. How long do you think Harvard is going to be American, if this keeps up, as an even more provocative example? How long can it be?

This is a curve to stay ahead of. Not one to get drowned by. A while back, when I spoke about the Ship Sinking, perhaps you thought I meant it metaphorically. Now you understand how literal it is. But understand this much, too: it’s growing more literal every day.

As always, if you need help, just reach out.

Lots of love,

Umair (and Snowy!)

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