EUNA (EU and North America) is slipping
The EUNA countries are legacy brands living off of past glories. They are losing their dominance and doing so quickly
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The European Union and North America (EUNA) are skidding down to the bottom of the ranks in the future world. This is not a unsubstantiated opinion. Especially the U.S., once at the top of all the world’s best lists, is now, often, not even in the top 20. That is not intended to predict a fall of the West. While in need of revitalization, the long term prognosis for EUNA is good. However, for now, the intellectual and enterprise center of Western civilization is not be in EUNA and it won’t be for some indeterminate length of time.
I, the Nomadic Polymath, have moved to Belarus and Albania (still looking for a winter home). Andrew Henderson, the Nomad Capitalist, has homes in Bogota, Belgrade and Kuala Lumpur with secondary homes in Mexico, Montenegro and Georgia (the one in the Caucasus). I'm not sure, but he is speaking like he may have just bought a home in Dubai.
Andrew emphasizes decisions pointed at lowering his and his clients’ tax bill, a key component of his 'go where you are treated best' philosophy. For me, I am most incensed not by high taxes (though I am incensed by them) but by high prices. The $8 Parisian cappuccino is disgusting. The Numbeo budget for a single person living in a one bedroom apartment in the city center is my down and dirty measure of cost of living in various cities. I have found, after living in several cities, that their algorithm does a good job of estimating the cost of a comfortable, though modest, lifestyle.
The Numbeo algorithm renders a cost of living in Miami of $3,105 per month, after tax. In Tirana, it renders a cost of $895 per month after tax. People might immediately say, 'Yeah, but you are living in Miami!', implying that the Tirana lifestyle suffers by comparison. However, having lived in Miami for six years and now going on my third year in Tirana, I'm not seeing the benefit of Miami. To clarify, in Miami, I lived in Sunny Isles Beach, a very upscale community on the beach and half way between Miami and Fort Lauderdale. In Tirana, I live in Blloku, the most upscale urban setting in the city.
As I state often, the world has changed, and now every city of any size, no matter where in the world, has a 1st world area and a 3rd world area. In other words, it is far better to live in Blloku than it is in South Chicago. In Blloku, I can buy an Armani suit and my wife can buy Prada shoes. Life is relaxed, affluent and safe. In South Chicago, I can get robbed and maybe shot.
In Blloku, one can lease a very nice 150 sq m apartment, with very high quality furnishings, for about $750 per month. In Miami, off of the beach, you might be able to lease such a place for around $3,000. It will cost at least double that on the beach. I fully admit that in Miami, you are likely no more than 15 km from the beach and in Blloku, the good beach is about a 40 minute drive away. People's tastes vary, but I would rank the beach at Shkembi i Kavajes above the beaches of South Florida. In Shkembi i Kavajes, I can sit at a 5* seaside restaurant, having a snack of roasted jumbo shrimp and Chablis while looking out on the Adriatic. There is a broad, concrete walkway, no road, and ample chaise lounges and umbrellas for rent. There is no equivalent on South Beach and, even if there was, it would cost, easily, 5X as much.
There is a trend right now where EUNA companies are setting up offices in Eastern Europe to capitalize on low cost employees. Some of the low prevailing salaries is because the standards of living are lower than in the West. However, the biggest component is increased purchasing power through favorable FOREX and lower tax overhead. This is creating an economically bifurcated workforce with those who procure a position with a multinational company. These are becoming the most affluent people pretty much anywhere. My neighborhood is full of S class Mercedes, Range Rovers, and even some Lambos, Rolls Royces and Bentleys.
Poor, even middle class, people are usually 'stuck' in their home country. The few, ultra-wealthy people have loopholes that keep their effective tax rates very low and, simultaneously, their personal budget as a percent of income is tiny and makes the cost of living irrelevant. However, the successful, usually young, entrepreneurs learn that the regulatory and tax environment of EUNA is very detrimental to their career development. Highly regulated business environments create growing compliance expenses and substantial business taxes substantially lower the internally funded growth rate potential.
Andrew Henderson moved out of the United States, renounced his citizenship, developed a portfolio of passports and grew Nomad Capitalist very quickly. He is now up to over 40 employees. Because of the primarily unregulated and untaxed environment, he did not need to dilute his ownership by acquiring outside investors to fund his growth. He, quite easily, was able to procure high quality, low cost employees.
Who knows if I will be as successful, but MichaelWFerguson.Substack.com is my initial foray into growing a 'Polymath Central' locus intended to provide a broad spectrum of services to polymathic people and to give aspiring Polymaths a platform that will be rich in audience. Like Andrew Henderson, Polymath Central will not be an EUNA enterprise. I will have several residencies, but none of them will be in EUNA.
The above graph, which I show to people at every opportunity, shows changes in U.S. incomes as reported by the IRS. Yet again, I will point out that the middle class is, in fact, shrinking but that is not because people are getting poorer but because they are moving into the 'upper class'. As is immediately apparent, the households with incomes over $150K are growing exponentially and, in 2020, constituted about 18% of all households, up from about 3% in 1970. It is important to note that these figures have been adjusted for inflation, so they do represent actual improvements in standard of living. Many of these families are location independent with their income and circumstance. In other words, like Mr. Henderson and I, they can live wherever they want. And a growing number of them will choose somewhere outside of EUNA.
Suppose I have a quickly growing business, say at 25% per year. My pretax return is about 20%. In my home country, even if I don't transfer the income to my personal budget, I will incur about 25% corporate taxes. That means that my after tax return will be 15% and in a jurisdiction where there is no corporate income tax, my return will be 20%. After ten years, I will have grown my business about 4X in my home country, and 6X in a more friendly country. Additionally, because the cost of living is lower in non-EUNA countries, it will take less of my profits to finance my lifestyle, and thus increasing the benefit of moving.
Andrew Henderson calls EUNA countries, 'legacy', asserting that they are living off a reputation once earned but now not deserved. I tend to agree. Saturday night, I was sitting at a wonderful restaurant in Taiwan Center near downtown Tirana with a friend. I was having a light snack of a 1.30 USD grilled ham and cheese sandwich and a 500 ml carafe of very credible cabernet (6.00 USD) looking out at the large fountain.
I mentioned to him that I had watched the news from around the world that afternoon. It appears that the whole world is falling apart with runaway inflation everywhere, gas shortages, farmers protesting in the Netherlands, the housing market collapsing in China, governments falling all across Europe, crime running rampant in American cities, on and on. And we are sitting in Tirana in total serenity. We could just as easily be in Belgrade or Sophia or Krakow, though Tirana is still my favorite.
This is definitely a 'red pill' opportunity. I know most people in EUNA still think that they have something special and, honestly, won't even come to Eastern Europe to discover what they are missing. However, the red pill is there to be taken. As Andrew Henderson implies in nearly every one of his YouTube videos, the future is happening in Eastern Europe and, even more so, in East Asia. He is particularly taken by Kuala Lumpur, but employs mostly Eastern Europeans. The EU and North America (and we should include Australia) is moribund. If you must work for a large employer, then EUNA is definitely the place to be because that is where the jobs are and, even with out of control cost of living, salaries are high. However, if you are looking for career and economic freedom, then, seriously, flee. EUNA is not where you will find it.
I do, actually, think that EUNA will turn it around, eventually. There are a few glimmers of hope, especially in the EU's growing number of 'digital nomad' visas. Also, Italy (and Switzerland) is offering a flat 100K Euro tax for high income foreigners who earn their income outside of Italy. That may seem like a lot of tax, but for location independent seven figure entrepreneurs, it can be substantially less than 10%. Italy still has a very high cost of living. Milan, for example, has a Numbeo budget of 2,150 Euros. That is certainly less than many EUNA locatons, but far above the cost of living in the Balkans or S.E. Asia.
The voters of EUNA still think of the rich as their sugar daddies and demand that they 'pay their fair share' which usually means over half their income. Then, like Gavin Newsom, they glibly ask, 'Where else are you going to go?' Well, they are finding out. Andrew Henderson and I are the vanguard, but we will be followed by a throng of location independent expats over the next few years. In fact, I just met an American woman who told me that she has 60K USD per month of investment income and she is transferring everything to Tirana and renouncing U.S. citizenship.
I send my regards from Hungary where I moved back into my bought and paid for house after living 10 years long in Germany (and having failed getting a second citizenship out of bureaucratic reasons). The cost of living here is much lower than in Germany, no rent, and the health insurance is insanely cheap. That said, the system is ultimately corrupt (like everywhere), and don't get sick here.
After the German tax authority seems not to support my company that is still based there (other type of bureaucracy), I'm slowly thinking to moving my company somewhere else, but not to Hungary. In here, once you have a high enough turnover, someone from the government will show up to take over what you've built (all my clients are from abroad). It's just the cultural heritage of communism and corrupt officials/politicians that constitute a corrupt system. But, this also might be our saving grace; people in here already know that politicians are not working in their interests, and act as such. At least those who are not completely brainwashed by the overreaching propaganda.
Hahaha true for the EU maybe. Most Americans have failed to meet the bar for generations already now.