Startup/Growth vs. Private Equity Thinking in California & Kansas

I was reading an article comparing California vs. Kansas by Robert Reich.

The gist was that as Kansas has cut taxes supposedly to boost growth, their economy has actually contracted, while California, with some of the highest taxes in the nation, has grown, has the best public university system in the U.S. and debatably the world, and has the fastest growing industries like tech and entertainment.

In reading the article I couldn’t help but think of how California is like the startup who pours tons of money into investing in a product that might not pay off for 10 years. The comparison is California’s higher taxes to pay for our education system, which invests in workers who won’t actually be productive for a long time. That is a growth mindset.

Kansas reminds me more of a private equity acquisition of a dying company: the goal isn’t to invest in the future anymore, it’s to cut costs and extract as much value out of the company’s existing cashflow as possible.

I’m sure Kansas doesn’t think of it that way, but that is essentially how they are behaving.

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