Why Some Nations Succeed and Others Struggle
Why do some countries do so well, while others don’t? The 2024 Nobel Prize in Economics went to Daron Acemoglu and James Robinson, who explain this with one key factor: institutions. Their research in “Why Nations Fail” shows that it’s the institutions that really make the difference in a nation’s long-term success, not things like geography, culture, or resources. But while we can invest in everything from Bitcoin to Butterfly ETFs, there’s no investment option that tracks the one thing they say matters most: institutional quality. This gap in the market is a big missed opportunity, and we’re missing the chance to match our investments with the strongest predictor of long-term wealth.
Why Institutional Quality Really Matters
Countries with good institutions tend to show:
- Less corruption
- Better protection of property rights
- More efficient markets
- Higher levels of innovation
- Better ways of using capital
- More economic resilience during tough times
The Missing Investment Opportunity
Right now, we have:
- ESG-focused ETFs
- Funds that focus on governance
- Democracy-based funds
- Country-specific development funds
But none of these directly focus on institutional quality as their main factor. That’s a big missed opportunity for long-term investors.
What an Institutional Quality ETF Could Look Like
A new ETF could focus on countries with the strongest institutions, looking at factors like:
- Rule of Law Index (World Justice Project)
- Property Rights Protection (Heritage Foundation)
- Effectiveness of Institutions (World Bank)
- Corruption Perception Index (Transparency International)
- Economic Freedom Index
- Regulatory Quality measures
Why This Would Be Better Than Traditional Index Funds
This new approach could:
- Avoid countries with unstable or authoritarian regimes
- Focus on nations with long-term growth potential
- Reduce risk by avoiding political instability
- Invest in markets that have a proven record of creating wealth
- Automatically meet ESG standards through institutional factors
Who Would Be Interested in This ETF?
This ETF could attract:
- Long-term investors saving for retirement
- ESG-conscious investors
- Big institutional investors looking for stable returns
- Private wealth managers focused on risk management
Why This ETF Makes Sense Now
With growing global interest in:
- Quality of governance
- Democratic values
- Sustainable development
- Managing risk
It’s the perfect time for an investment that focuses on institutional quality.
My Call to Action
If you’re an ETF provider or an institutional investor interested in making this idea a reality, there’s a chance to be the first to create something truly valuable. The market needs an ETF that puts capital where it can support good governance.
Feel free to ask questions, I’m curious about your thoughts.