The Long Tail of Productivity-Boosting Capital Investment

Lucas and Luna explore a specific, under-discussed driver of productivity growth: the surprisingly long tail of returns from capital investment in physical assets. They examine a 2025 study by economists at the Federal Reserve Bank of San Francisco that tracked the productivity impact of equipment and software investments across US industries over 25 years. The study found that the full productivity benefit of a typical investment takes about 12 to 15 years to materialize—far longer than most companies' planning horizons. The hosts discuss why this matters for today's business leaders making capital allocation decisions, and how the delayed payoff challenges the prevailing short-termism in corporate strategy. They also touch on implications for public policy, particularly around tax incentives for R&D and equipment purchases. The episode concludes with a reflection on how patience in capital deployment might be the single most underrated factor in long-run productivity growth. #Productivity #CapitalInvestment #LongTailReturns #FedStudy #SanFranciscoFed #EquipmentInvestment #SoftwareInvestment #CapitalAllocation #CorporateStrategy #ShortTermism #ProductivityGrowth #Economics #Macroeconomics #BusinessStrategy #PPE #ROIC #FexingoBusiness #BusinessPodcast Keep every episode free: buymeacoffee.com/fexingo