In the world of economics, fallacies run rampant, as noted by Henry Hazlitt in his book Economics In One Lesson from 1946. If Hazlitt were around today, he would likely point to Nvidia as a prime example of defying economic assumptions. The Santa Clara-based company faced near-death in the 1990s, with its first chip failing and its founder Jensen Huang facing an existential crisis. This challenges the long-held belief that easy money from the Fed can sustain businesses, as Nvidia struggled to find investors and access capital.
Despite the prevailing notion that government spending fuels growth, Nvidia’s struggles to secure funding paint a different picture. The company’s routine search for investors contradicts the idea that government spending drives GDP growth. As the federal government prepares to spend trillions in 2024, the unseen impact of politicians hoarding wealth becomes apparent. Countless promising businesses may have perished over the years due to government interference, hindering innovation and economic progress.
Nvidia’s survival was made possible by a $5 million lifeline from Sega, highlighting the importance of wealthy individuals and corporations in supporting economic growth. This challenges the common criticism of tax cuts for the rich, as reducing the burden on those with the greatest ability to invest can lead to prosperity for all. In the case of Nvidia, the investment from a wealthy benefactor was crucial for its survival, debunking the argument against tax breaks for the rich.
Despite facing financial hardships in the 1990s, Nvidia managed to survive with the support of Sega and continued to face financial challenges in the years that followed. Despite the Fed’s rate hikes and claims that they depress stock prices, Nvidia’s valuation has soared in recent years, proving that access to capital remains a constant struggle for businesses. The company’s success serves as a rebuke to the economic theories that have failed to accurately predict its unlikely ascent.
Overall, Nvidia’s story serves as a powerful reminder that economic assumptions often fall short in the face of real-world challenges. The company’s survival and subsequent success demonstrate the importance of access to capital and the role that wealthy individuals and corporations play in driving economic growth. As the economic landscape continues to evolve, it is essential to reevaluate long-standing beliefs and embrace a more nuanced understanding of the factors that contribute to prosperity and success.
