On July 9, 1997, Apple Computer (as the company was then known) was teetering on the edge of bankruptcy.
Its cash reserves were dwindling rapidly. Its losses were mounting. And the once mighty company was just 90 days away from failing.
This was an almost unimaginable outcome for a company whose bold technological innovation had captured the hearts and wallets of an entire market in the early 1980s. But complacency had set in. Apple stopped innovating, burned through mountains of cash, and appointed incompetent management and directors who enriched themselves at shareholder expense.
But with their backs against the wall, the Board of Directors finally turned to the man who they had ousted in 1985— Steve Jobs— and made him CEO again.
Jobs went on a cost cutting rampage. He slashed Apple’s unwieldy product lineup and refocused the business on just four core products. Then, in a controversial but crucial deal, he secured a $150 million investment from Microsoft which provided the cash that Apple desperately needed to survive.
By 1998, Apple was profitable again, thanks in large part to the success of the iMac.
Over the next decade, Apple went on to introduce iconic products like the iPod, iPhone, and iPad. And by 2011, just 14 years after almost failing, it had become THE most valuable company on earth.
This type of success story— battling back from the abyss— is not uncommon.
Plenty of companies have turned things around when they were facing insolvency… or resurrected their brands from obscurity. We’ve seen down-and-out former champions stage incredible comebacks. Countless people have gotten clean, turned their lives around, and become wildly successful.
And sometimes even nations are able to do the same thing.
I once had a taxi driver in Singapore, an older gentleman who grew up in the 1940s and 50s. He painted a vivid picture of what life was like back then: people used to literally shit in buckets and pour their waste onto the muddy streets. Malaria was rampant. The average person had zero prospects. It was one of the most impoverished places on earth.
Today, Singapore is one of the wealthiest nations on the planet, with a per-capita GDP almost twice that of the United States. The country has zero net debt and boasts one of the largest sovereign wealth funds in the world.
(And all of this in a place with virtually zero natural resources. There’s no oil wealth or lithium deposits or ocean of natural gas. Singapore didn’t even have its own fresh water supply!)
This transformation from rags to riches didn’t happen by accident. It was the result of deliberate, sensible policy decisions— like embracing capitalism and allowing the free market to flourish.
Lee Kuan Yew, the first Prime Minister of independent Singapore is credited with its transformation, and he wrote a book entitled From Third World to First detailing the process. It’s pretty much a ‘how to’ guide for countries to turn things around.
Singapore isn’t without its challenges—no place is—but the reversal of its fortunes is nothing short of astounding. There are other examples too (like Estonia after the fall of the Soviet Union, Hong Kong in the 1800s, etc.)
Today we’re seeing a similar story unfold in El Salvador.
Just a few years ago, El Salvador wasn’t even a functioning country—it was a crime scene. People couldn’t leave their homes without fear of being shot or kidnapped. The economy was in shambles, lawlessness reigned, and hope seemed nonexistent.
But they started to turn it around.
Of course there’s been plenty of controversy; the new president locked up all the criminals and threw away the key. But the results are clear: today, El Salvador is blossoming (and crime is virtually nonexistent).
Right now, our CEO Viktorija is leading a boots-on-the-ground trip in El Salvador with a group of our Total Access members (Total Access is our highest tier membership at Schiff Sovereign).
The trip has been amazing: both the government and private sector have rolled out the red carpet to show how serious they are about doing business.
For example, the CEO of a major bank didn’t just show up for a token visit and quick meet-and-greet. Instead he brought an entourage of department heads who made presentations to our Total Access members about the bank, its balance sheet safety, and business opportunities.
The Minister of Economy, as well as other officials at the highest levels of government, have consistently demonstrated a willingness to hustle in order to change people’s perceptions.
They know most foreigners still think of El Salvador as a banana economy. But they’re working relentlessly to change that.
And they take nothing for granted, because they can’t. They don’t simply assume that wealthy foreigners and businesses want to invest in El Salvador. In fact, they assume that no one wants to invest in El Salvador. They start from that premise and hustle their butts off to showcase the vast array of talent and opportunity in the country.
Because of this, the economy has been able to develop small industries in cloud services, pharmaceuticals, and other technology. It’s a far cry from what most people usually think of a small, Central American nation.
What our group has witnessed has been astonishing. And, again, like Singapore, it’s not an accident. It is the result of deliberate, sensible policy. Hard work. And a hustle mentality to constantly bring in new business.
It’s almost the opposite of how the US government has operated, especially over the past few years. The Biden Administration has gone out of its way to chase away foreign investment, weaponize the dollar, and destroy America’s reputation for strength and stability.
Yet El Salvador’s transformation is an analogy for what’s possible: even places teetering on the edge of collapse can turn their fortunes around. So can the US.
In fact, the US has every advantage conceivable: vast resources, modern infrastructure, and an enormous, talented labor force. With such abundant gifts, the US economy should be growing at a real (i.e. inflation-adjusted) rate of at least 5% per year, which was typical in the 1950s and 1960s when there were far fewer regulations on the books.
It seems like the US economy should be almost impossible to screw up.
Yet these days, real GDP growth is seldom above 2.5%. And one key reason for the economy failing to live up to its potential is bumbling, bungling, incompetent government bureaucracy.
The private sector is suffocated by regulations, while the nation is burdened by extreme levels of debt and the highest inflation in decades.
But, like all things, it is fixable. The question is whether the US will act before the window of opportunity shuts. We certainly hope so.
If not, there will absolutely be consequences— including substantially higher inflation, stagflation, the loss of the US dollar as the world’s reserve currency, substantially higher taxes, and more.
This is why, despite being optimistic, it still makes so much sense to have a Plan B and hedge some of those major risks.
