27 Insights From Three Years of Bismarck Brief

Since 2021, our analysts have written nearly 1 million words on new technologies, global industry, and live players. Here are 27 insights from our work.

Dec 23, 2024

The depth and breadth of our long-form investigations at Bismarck Brief give rise to many new insights, observations, and models of economics and politics that do not fit neatly into any specific Brief, but are valuable and important to consider nonetheless. Every year, we have collected some of our top new insights and published them on the platform formerly known as Twitter. To simplify reading them and finding further links to the Briefs that surfaced them, here are our seven top insights from 2024 in short form, followed by another twenty from 2022 and 2023:

#1 - Most large companies are not mission-driven organizations designed and led to meet a technological or logistical goal and capture profit from the value they create. Rather, they are designed, managed, and treated as financial products optimized to meet financial metrics. New and nimble companies led by live players tend to have clear and charismatic goals, whether one thinks of Amazon's "everything store," OpenAI's aim to create artificial general intelligence, or SpaceX's mission to settle Mars. But what is the rest of the economy doing? In defense contracting, pharmaceuticals, and many more industries, the average company does not target tangible, useful goals in the real world, but intangible financial metrics or even social goals. Most companies are not even trying to be productive, as commonly understood.

The famed defense contractor Raytheon, for example, is now part of a new corporation called RTX, with the explicit goal of achieving financial stability through bundling unrelated businesses into a single corporate entity—not building better weapons or radars. In contrast, the semiconductor manufacturer Broadcom targets growth and profitability. But not through inventing and releasing transformative products, but rather through savvy acquisitions and cost-cutting. A company like Ozempic-developer Novo Nordisk, which has a singular focus on diabetes, is an exception to the rule in pharmaceuticals, where most companies are rather like AstraZeneca, stitching together different portfolios of medications they hope will prove profitable.

The problem with such "portfolio" companies is that, even if financially successful, they are generally incapable of concentrating attention and resources to solving difficult technological or logistical problems that would greatly increase wealth and drive forward progress. Industries dominated by such firms become stagnant as executives seamlessly jump from one supposed competitor to another, interchangeably. Both executives and employees stop seeing the company as a unit of competition, but rather advocate for the needs of “the industry.” Importantly, these firms are different from what we call conglomerates, although they look similar: conglomerates, like South Korea’s Hyundai, or Elon Musks’s empire of companies, intentionally "diversify" to achieve strategic capabilities and optionality, not to optimize financial metrics.

#2 - Technical succession failure kills companies. From Intel to Boeing to Sony, the story of once great technologically advanced companies dying begins with the ascendance of a CEO who is an outsider to the company's technical tradition of knowledge. Intel's first technical outsider CEO decided to stop experimenting with new chips—like for the iPhone. Boeing's decided to stop designing more ambitious planes, but re-release tweaked old ones to save money. Sony's decided to stop betting on new consumer electronics products. All of these once seemingly untouchable companies have since been grossly outcompeted and are struggling to remain relevant. Boeing will face competition not only from its traditional rival Airbus, but also SpaceX and likely a Chinese competitor in the medium-term future. Intel is being squeezed by companies like AMD, Arm, and Nvidia. Sony was displaced by Apple long ago—though Apple too, now, is ripe for displacement.

But, for years, only the most careful and technically literate observers could have seen these companies were sawing off the branch they sat on. The decisions of Boeing's non-technical CEO initially led to years of high profits and optimism. Then, one day, those same decisions caused planes to malfunction and crash. Now Boeing has been unprofitable for years. These examples are perhaps only symptoms of a wider shortage or decline in managerial competence. Huge swathes of big business and bureaucracies rely on outside consultants like McKinsey to make even basic decisions for them.

#3 - Wealth redistribution can work—as long as you can keep funding it. Redistributive economies do not necessarily collapse. They can last for a long time and even be strengthened. They are driven by a political calculus, with the redistributor of wealth patronizing a network of distributees to keep power. The balancing act redistributors face is ensuring the political promises of redistribution do not exceed the actual resources available. Contrast Saudi Arabia with Venezuela, which look very different, but are both redistributive petrostates of about 30 million people.

The difference between Saudi Arabia's wealth and Venezuela’s poverty is mainly that Venezuela's national oil company PDVSA is dysfunctional, but Saudi Aramco isn't. Two-thirds of native Saudis work for the government. The profligacy of the Saudi economy is underwritten by oil exports by Saudi Aramco, which has a special arrangement for autonomy in technical, investment, and corporate affairs, in exchange for regular financial tribute to fund the government. Venezuela’s oil company used to have a similar arrangement. But political conflict destroyed the functionality of PDVSA. Perhaps surprisingly, Venezuela actually has more oil than Saudi Arabia! But it fails to extract and sell it anymore. Had a few different decisions been made, a few events gone differently, an alternate Venezuela today might be hailed as a success of socialist economics. This would be false. But it was then not redistribution that destroyed Venezuela so much as internal conflict and incompetence.

The more common failure mode of redistribution is not sudden dramatic economic collapse like Venezuela, but slow, grinding stagnation as a too small pie is divided amongst too many eaters, like how Argentina tried to fund social democracy with low-value agricultural exports. In Nigeria, however, the pie of oil exports is just far too small to allow redistribution across a population of hundreds of millions. Instead you get a weak centralized petrostate ruling over a large impoverished country. Redistributive political economies that understand their own redistributive nature can even take actions to create more value in order to subsequently redistribute it, becoming stronger and richer in the process! This type of economy should be familiar: it is a Western liberal democracy.

#4 - State subsidies can be either extremely effective or wasteful failures depending on whether they follow the logic of industry, or try to defeat it for ideological reasons. Wind power is a prototypical example of ineffective subsidy. It is basically incompatible with the needs of industry and development in almost every way, from intermittency to diseconomies of scale. Yet governments fund it anyway. Such poor subsidies result in major negative distortions to markets, infrastructure, and perceptions. In order to craft effective subsidies, government officials must have personal knowledge of the technical aspects of a field and also social contact with practitioners. Such conditions can be met even in Silicon Valley. Palantir is by far the most successful investment of In-Q-Tel, the CIA's venture capital arm, which invested in the company early on even when established investors rejected it. China is the world's largest manufacturing power today. It rapidly built this industrial base through the use of generous subsidies! And it continues to apply the same strategy to cutting-edge domains like advanced semiconductors.

#5 - One of the main mechanisms of U.S. geopolitical power is simply giving loans and money to foreign governments. The United States is the world's preeminent superpower not only due to the U.S. military, its vast economy, and its influential cultural production, but also because the U.S. government just directly loans or gives away huge amounts of money to most other governments on the planet. "International financial institutions" like the World Bank and IMF are headquartered in Washington, D.C. funded by the U.S. government and its allies, and the U.S. has a de facto veto on their actions. These institutions are obscure at home, but play huge, contentious roles abroad. The IMF lends money to governments facing financial crises. In theory, this should be followed by fiscal reforms. In practice, some large countries like Argentina, Egypt, Ukraine, and Pakistan just keep getting more loans no matter what.

The World Bank, meanwhile, is supposed to profitably fund economic development around the world. Instead, it is effectively a way to subsidize the bureaucracies of Third World governments or even just give out charitable aid. When the annual funding of such organizations and others like USAID is combined, the U.S. government effectively directs hundreds of billions of dollars to a long list of foreign governments across the world, every year, with little to no strings attached. The real string, of course, is alignment with and deference to U.S. priorities abroad. For poor and even middle-income countries, the possibility of receiving billions of dollars in cold hard cash is a very powerful incentive. This financial power is one of the key planks of U.S. hegemony. Only China, perhaps, might be able to match it, though it so far does not.

#6 - When it comes to effecting political change, how you get there matters a lot less than what you do once you're there; whether you have a live player skilled at reforming institutions. This is why populist victory at the polls so often fails to cause meaningful change. From Brazil to the United Kingdom, recent years are littered with examples of high-energy populist victories that ultimately resulted in little or no change to the political and economic fundamentals of those societies. The missing ingredient was institutional reform by live players. Many of the world's most consequential recent political players did not rise to power on the back of populist waves at all. In Saudi Arabia, Mohammed bin Salman rose to power as a monarchical heir. In Russia, Vladimir Putin rose through political appointments.

In El Salvador, Nayib Bukele did not attract international attention until after his election to the presidency and subsequent reforms. His earlier political career was more conventional, rising as a mayor and working with established political parties, including on the left. In Hungary, fifteen years of uninterrupted and institutionalized rule by conservative, nationalist populists has surprisingly not yet meaningfully altered the country's trajectory in economic, demographic, and international affairs, compared to its neighbors like Poland. Populist victory at the polls, even repeated and decisive victories, can only ever be an initial step towards reform. Unless populist energy is effectively harnessed by a skilled live player in politics with a new vision for the institutional landscape, it will dissipate.

#7 - The common conception of political power is that it grows out of popularity, money, or the barrel of a gun, but one of the most underrated paths to political power is intellectual work. Iran's surprisingly robust theocratic government is an outgrowth of Iran's class of Shia Muslim religious clerics. The 1979 revolution was led by Ayatollah Khomeini, then already an elderly man and respected scholar. Khomeini led a revolution and war at an age most would be entering retirement, after decades of a relatively quiet career as an Islamic cleric. It is a notable counterexample to the idea that revolutions are led by the young. The core of Ayatollah Khomeini's political power base were his students.

The career of Elizabeth Warren shows that this is not a quirk of Iran. Warren also entered politics at an age most would be considering retirement, after decades as a relatively niche law professor. Described as a Democratic Party luminary with an unusually strong network of allies and proteges she has been able to place in both elected and unelected positions, what is unsaid is that many of these people are Warren’s former students from Harvard Law School.

Intellectual work and pedagogy are powerful because they inculcate young future elites into an often deeply ideological worldview and create a robust social network between students and teachers. Politics is frequently a phenomenon of a highly organized and motivated minority imposing its will on a disorganized majority. Intellectual work is a mirror of populism in a way: deeply recruiting a select few, rather than superficially recruiting a great many.

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Here are twenty more insights from 2022 and 2023:

#8 - The wealthiest people in the world are not motivated by money. They are motivated by idiosyncratic ideological, personal, and prestige goals. Often, they simply want to be the most powerful and important person in a field. As a side effect, they become rich. A motivation for empire-building is frequently mistaken as a motivation for money. Jeff Bezos’ growth philosophy is similar to Foxconn’s Terry Gou. Both men prefer growth to profit, even in the long-term. They would never sell business empires for mere money! Others have much stranger motivations. Elon Musk wants to expand humanity to Mars. BlackRock’s Larry Fink wants to guide global financial decision-making; he is one of the main driving forces behind growing institutional adoption of Bitcoin and other cryptocurrencies.

SoftBank’s Masayoshi Son wants to bring the promises of new technologies like AI to life. The Koch brothers really wanted to persuade everyone that libertarianism is good and true. The live player behind advances in xenotransplantation is a committed transhumanist. FTX’s Sam Bankman-Fried was motivated by funneling as much money as possible into the Effective Altruism movement. There is one notable exception to this rule: dead players are genuinely motivated by money. The most profitable companies in the world are disproportionately state-owned oil companies and banks.

#9 - Strategically, money is a surprisingly weak resource. No matter how many things you can buy with money, the list of things you cannot buy is even longer. This applies both to individuals and to organizations. Through SoftBank, Masayoshi Son poured $150 billion into the global tech industry. After years, there isn’t one clear example of a tech innovation that would not exist if that money had not been spent. The money just failed to drive innovation. China and Saudi Arabia have similar problems. The Saudi Crown Prince is trying to invest his way into industrializing Saudi Arabia. China is trying to invest its way into industrializing Pakistan. Both plans are failing. You cannot buy industrialization with money. Money is very useful. But it is infrequently the bottleneck it seems to be. Key bottlenecks are more likely to be in skill, time, knowledge, social capital, and social technology, rather than mere funds. Misunderstanding this leads to financial losses and no progress.

#10 - Many of the world's most powerful and important institutions are still run by family dynasties. No matter how large or complex societies have become, this ancient social technology persists. The government of Singapore is run by the Lees. A different Lee family in South Korea runs Samsung; the Chung family runs Hyundai. The families of both the late Prime Minister Shinzo Abe in Japan and Xi Jinping in China are full of past political leaders. Dynasties work well in large part because it is easier to transfer skill, knowledge, and power to a successor known as intimately as a child or sibling.

The most successful family dynasties do not enable incompetence, but rather have invented unique social technologies to mitigate having a smaller pool of talent to draw on. The Moroccan royal family educates its princes in tiny classes with the other students selected from the smartest and most accomplished pupils in the whole country. The prince gains not just trustworthy friends, but accountability too. Competent dynasties rule in America too. For example, The New York Times is not just family-owned, but family-led. The Sulzberger family forces new members to undergo a ten-year cursus honorum of jobs outside the paper before joining it. The Bechtel family has contracted for large U.S. government construction projects for generations. The Wallenberg family is the most influential in Sweden’s economy.

#11 - Aligning political and economic elites is a problem in every society. There is surprisingly low overlap between the most politically influential people and the most economically influential. A fractious elite leads to social strife and conflict. A failure to align political and economic elites can be very costly. In France, it seems that a conflict between the President and France’s formerly most important logistics magnate has cost France much of its influence in Africa.

Sweden is archetypal of one solution: social democracy. In short, the most important industrialists ally with political elites against small business and high-earning employees. Big business gets even bigger. In exchange, its bigger profits fund social programs. This leads to income equality, but not wealth equality. This system succeeds at aligning political and economic elites. Sweden is as a result a very stable society.

China has a different solution to the problem of bickering elites. Cooperative economic elites, like Tencent’s Pony Ma, are drafted into ceremonial political positions and given official titles in the Communist Party. Uncooperative ones, like Alibaba’s Jack Ma, are punished by regulators and sometimes “disappeared” from the public eye for a time. China’s model is interesting to contrast with America’s model.

Rather than drafting their billionaires into formal government positions, American billionaires are expected to sponsor political proceedings with their money in exchange for avoiding regulatory and media harassment. This is complained about, but no serious alternative is proposed—though, as of late 2024, Elon Musk appears to be trying to forge a new relationship that goes beyond mere financial sponsorship.

#12 - Natural resources aren’t rare, what is rare are functional institutions that can extract those resources. Having lots of oil is worthless without wells, refineries, and pipelines—and technical experts. We think of countries such as Qatar, Russia, Norway, and Australia as well-endowed by nature or luck with valuable natural resources. But in reality, they are actually just the countries with the most functional resource extraction institutions. Venezuela has more oil than Saudi Arabia, but has no functional organization to extract that oil. Even in developed countries, the potential for resource extraction is often missed or wasted. The United Kingdom is a good example. China is overwhelmingly dominant in rare earths because it set up the industrial ecosystem necessary to cheaply mine, refine, and manufacture components from rare earths, not because of luck in natural deposits.

Even the figures for proven and estimated reserves of natural resources are themselves issued by technical experts, paid and equipped to do surveys and make judgments. They are often wrong, and often underestimate reserves. Exploration matters. It is not a given that someone will figure out how to exploit any resources that happen to exist. The key resource suppliers of the future are likely going to be different from today’s. In living memory, increased U.S. oil and gas production obsoleted a generation of theories about wars for oil. China sees major potential in Africa. The Mediterranean is now being drilled for gas. Should new fuel sources like hydrogen be widely adopted, the balance of resource-extracting powers will shift yet again.

#13 - Where a country gets its energy impacts its global relevance and political economy to a surprising degree. Each source of energy has notably different effects. Coal is a localizing force. It is generally burned for energy close to where it is mined. China still uses coal for a majority of its energy. Oil, however, is a globalizing force. It is easily stored and transported. Oil exporters use it as leverage in foreign diplomacy with success. Natural gas delivered through pipelines is a regionalizing force. Gas pipelines were used to tie Europe to Russia and Turkey. Liquefied natural gas transported by ship is an attempt to turn gas into a globalizing force like oil. Renewable sources of energy seem localizing. Nuclear power is the best example; it can be built up even in otherwise small or energy-poor countries like France, Japan, or South Korea. Wind power, hydropower, and solar photovoltaics also imply usage more like coal than oil, though a key variable is who manufactures the windmills and solar panels.

#14 - We have the means to make energy abundant and cheap, but nobody needs it. This is the true reason why nuclear power, fusion, geothermal, fracking, and more energy technologies are not pursued to their full extent. Energy usage per capita has stagnated or declined in Western countries for decades. In the U.S., it peaked all the way back in 1973! As populations are today on the path to decline, not further growth, we can expect even less energy will be needed in the future. In addition to a drop in demand, there are ideological headwinds against energy. The environmentalist focus on green energy is less about reducing carbon emissions than curbing what is perceived as excess energy consumption. This is why nuclear power is paradoxically not considered "green." Even China’s current plans for the future amount to continuing growth of energy use until China matches U.S. per capita energy consumption and then making that energy as carbon neutral as Europe aims to be.

This means that neither German environmentalists nor Xi Jinping can see a future with a higher level of development than that achieved by the wealthy West right now, which would require vastly more baseline energy. Efficiency rather than growth is thus the long term goal. There will be no appetite for growing the energy production of the human species by ten or even a hundred times over, until there is a vision for what such energy could be used for. Whether it is AI, robotics, space exploration, or something else, the need and desire for energy is the fundamental missing prerequisite.

#15 - Global technological priorities are surprisingly uniform. World powers are not operating on siloed traditions of knowledge that guide decisions on scientific and technological progress. Rather they seem to imitate each other, competing in a few narrow areas. Quantum technology is a good example. In both China and the U.S., this field is highly funded and favored by both scientists and government decision-makers, even though its potential remains speculative. AI is a similar story, as are humanoid robots and perhaps even drones. Rather than a diversity of frontiers of knowledge, we seem to keep returning to a global consensus on what the most promising new technologies are. This suggests that global technological progress is more fragile than it looks. If quantum or AI turn out to be dead ends, then both China and the U.S. will suffer the same defeat.

#16 - Every feat of technological mastery has at least one unique, hard-to-replace tradition of knowledge behind it. Breakthroughs are not inevitable results of societal progress, but pinnacles of perhaps decades of hard work by geniuses. Artificial intelligence is no different. The explosion of software advances made by OpenAI or Midjourney or Tesla have one thing in common: they are all enabled by hardware advances in manufacturing better and faster computer chips. The idiosyncratic companies behind this innovation—Nvidia, TSMC, ASML, Zeiss, Tokyo Electron—can practically be counted on one hand. At every layer of the hardware stack, there is effectively a monopoly or duopoly. It is not just a supply chain, but a chain of interlocking traditions of knowledge.

The centerpiece of progress has been the GPU, the "graphics processing unit." It was originally designed by Nvidia to power video games, not AI. Yet the live player behind it, Jensen Huang, knew what else it could be used for. The Dutch tradition of knowledge in photolithography behind ASML dates back to the 1960s, with roots in the 19th century. Replicating it is not a matter of funds, but of intangible knowledge. To gain the fruits of a tradition of knowledge, you can either poach its practitioners or expensively attempt to relearn all the knowledge from the ground up. To manufacture its own advanced semiconductors, that is exactly what China has been trying to do, poaching many key people from TSMC to join its own champion, SMIC.

#17 - Large states sometimes follow the example of small states. Small states still mattering may seem surprising in a world with one true global superpower, the United States, and where even secondary powers like Russia or India often seem irrelevant in many domains. Yet experimentation in governance is far easier in a small state. Often the key ingredient to making some new idea for governance work is simply the prestige and legitimacy of the state. It is not enough to have a deal or understanding with a state—one must be the state already.

The surprising trick is that any state will do, no matter how small. Successful experiments by small states have outsized impacts on what large states think is feasible or acceptable. Dubai has shown new cities can still be built from scratch. Estonia that it is indeed possible to replace bureaucrats with computers. El Salvador that a state can both annihilate powerful criminal gangs and also purchase new financial assets like Bitcoin at a profit. The original successful small state, Singapore, directly inspired these and others. Today it remains one of the single wealthiest societies in the world, whose sovereign wealth funds alter social trends in the rest of the world. Others like Monaco, Israel, Panama, and even the Vatican hold important lessons too.

#18 - The Middle East is surprisingly dense with live players for a region with few functional institutions. Whether one looks at Turkey and drones, Israel and cybersecurity, or the Gulf states and global investment, the Middle East is far more dynamic than other relatively poor regions like Latin America or Africa. Density of live players is not necessarily correlated to wealth or stability. While the Middle East is a diverse and heterogeneous region, we can offer two generally true contributing factors to explain this phenomenon. First, a lack of powerful bureaucracies probably helps. Many Middle Eastern and North African states started off very weak and only recently became stronger. As a result, what state capacity has been built up is still new, fresh, and subject to reform. Second, intense competition for power between peer players creates opportunities for players developing relevant skills and seizing opportunities. There is no genuine hegemon in the region, and most countries are capable of challenging or threatening others. As a result, there is an arms race in strategy that only live players can win.

#19 - Peacetime militaries are surprisingly dangerous, expensive, incompetent, or all three. By default, militaries seem to quickly develop into large and politically powerful patronage networks with their own favored policies, ideology, and even business interests. This explains why civilian control of the military is such a valued social technology in Western democracies. Elsewhere, from Egypt to Pakistan and even Thailand, the military is the main political force to be reckoned with. It is often said the Pentagon is too wasteful and unaccountable. But perhaps even the U.S. military must be sated with expensive programs and prestigious sinecures. Ironically, it seems like many militaries dread and avoid war due to the discipline it might impose on them. One could even argue that militaries are a rare example of a type of institution that is dysfunctional by default, since functionality can only be tested in rare, short, and destructive bursts of war, which are never twice quite the same.

#20 - China can build innovative and globally competitive companies, including ones that win in the U.S. market. Whether DJI in consumer drones or TikTok in software, Chinese companies now drive innovation on their own terms. For years, conventional wisdom was that Chinese companies are uncreative, capable only of more cheaply reproducing technologies or ideas from elsewhere. The conceit was that no matter how much manufacturing moved to China, global market leadership would always elude them.

Ironically, it was Silicon Valley memes that changed this—when adopted by Chinese startup founders! DJI's Frank Wang or TikTok's Zhang Yiming were dorm-room hackers inspired by the likes of Steve Jobs to build great global, rather than local, companies. U.S. and European elites have been caught off-guard, but know it is untenable to let Chinese companies take over their markets. Huawei, for one, has been outright banned, a fate that may also befall TikTok based on a law passed by Congress this year. As Chinese electric vehicles improve in performance and price, tariffs will need to rise to protect incumbents in the U.S., Europe, Japan, and South Korea.

#21 - It is more profitable in the short term not to be innovative than it is to pursue breakthrough technologies. Breakthrough technology or high-end products are usually loss leaders. The exceptions can be marketed and monetized, or subsidized by other products, but not always. This explains the Apple Paradox: why a nearly $4 trillion software and electronics giant is unable to innovate new products or drive forward new technology anymore. In theory, it has more money to spend than ever. And yet! To achieve new breakthroughs, a successful company must be controlled by a live player. But it is very difficult to argue to a board or dead player that giving a live player control is the right financial decision. A live player will take those profits and use them i.e. spend them.

In the long run, a company that can provide unlimited organ transplants on demand would be extremely profitable. But in the short run, it requires unpopular mad science and opaque political battles with federal bureaucracies. This is why successful companies still pursuing breakthroughs are always led by live players, often the founders. Only Mark Zuckerberg could have changed Facebook's name and decided it was now a virtual reality hardware company. Google, which has used its vast profits to fund Waymo’s self-driving taxis, may seem like an exception. But the project was originally, personally created by Google’s cofounders, who retain their control over the company even though they do not actively lead it.

#22 - The economy runs on custom as much as it runs on capitalism. What economists call "distortions" in the free market are far too numerous and strong to be merely that. It is rather that alongside a market, there are also the same guilds, patrons, clients, and cults as ever. A good example of this than the U.S. financial sector, which is more like a self-regulating financial guild than an "industry." The "revolving door" is not just simple bribery of government officials by financiers, but a major alliance where the Guild delivers macroeconomic stability, helps enforce the government's will abroad, and polices the worst abuses in its own ranks. In exchange, the government defends the Guild's privileges and profits, including via bailouts with taxpayer funds or newly-printed money.

Free market logic describes how the laws of supply and demand incentivize providing the best goods at the lowest prices. But custom means economic decisions are made unthinkingly, outsourced to tradition, which might be political, ideological, or even aesthetic in origin. By law and in practice, the entire U.S. banking system has been fully guaranteed by the U.S. government for decades. The free market logic for how banks grow the economy simply no longer applies. They are doing something else now. Organizations like McKinsey prevent creative destruction from sweeping away inefficient and bloated incumbents to make way for leaner newcomers.

It is an open question how much of the economy is “capitalism” rather than custom. With government spending reaching 40% of U.S. GDP, trillions in annual nonprofit spending, and some unknown proportion of private sector activity taking place under the guardrails set by fiat rather than by the market, perhaps only a minority of U.S. GDP can actually be attributable to free markets. This is a very different economy from the one usually assumed to exist!

#23 - Revolutionary regime change can happen in developed and even post-industrial societies. In fact, it has happened multiple times in recent history. Look no further than Poland, Estonia, or, most recently, Ukraine. At some point, the term "industrialized" was quietly replaced with "developed" in order to paper over that industry in many cases had disappeared, then intangible metrics like rule of law and respect for human rights were added too. But if developed doesn't also mean industrialized, it means little. The communist societies of Eastern Europe were less affluent, but had many other key features of the modern world, including industry, elections, newspapers, egalitarian social norms, irreligion, and more. They were developed—industrialized and not traditional or agrarian—but also poor!

Poland and Estonia, for example, saw vast changes of government personnel with the fall of communism. In Poland and Hungary, former activists and anti-communist ideologues became the new ruling elite. In Estonia, former computer science professors did. In Ukraine, Russia, and many other post-Soviet states, this did not happen immediately or at all. But notably, Ukraine has been centralizing power and eliminating the previous elites through war and nationalism since 2014. These changes happened in countries with low fertility rates, weak traditionalist beliefs, and parliamentary democracy. The possibility of being developed and poor at the same time suggests the West could enter this condition. But it also suggests it could see revolutionary political change.

#24 - Functional institutions can be and are often small. The size of an organization, in terms of budgets, staff, and expenditures, is at best only a weak signal of functionality. Often large institutions are really subsidized by much smaller ones. DARPA is a canonical example. DARPA has driven technological advances in the internet, drones, stealth technology, and much more, with less than 200 employees and a fraction of a percent of the Pentagon’s budget. Israel’s Unit 8200 is another example. With a few thousand personnel, Unit 8200 maintains Israel’s expansive cyberwarfare capabilities and produces a stream of tech founders and highly skilled experts who enter the private sector. The platform formerly known as Twitter is itself proving to be an example. After he took it over in 2022, Elon Musk cut Twitter’s staff by well over half. The site still functions. A public forum used daily by hundreds of millions run by less than two thousand people. Small and functional.

#25 - Despite decay, Western institutions are still surprisingly functional in both large and small ways. The U.S. is still a global hegemon. Not just because of inertia, but because of functional institutions. The Pentagon actually does a decent job of supplying the world’s largest military. It’s slow and cannot adapt quickly. But it can adapt slowly. For peacetime, this works well enough to maintain U.S. military might. Fears that Australia would stop being a reliable U.S. ally due to its growing economic relationship with China have proved to be without merit. Australia’s internal political economy is simply robust to caring about resource exports. Even in Europe we can find examples of surprisingly functional institutions. The European Commission is perhaps bad at many things, but it is great at slowly pushing through European political and economic integration. On the cutting edge of technology and science, the U.S. is, needless to say, still home to a slew of top performers. China’s economic rise does not mean Chinese global hegemony is a fait accompli. Western institutions are not all bad; many are worth observing carefully.

#26 - Many of the most important players in global politics are very old. Nancy Pelosi is 84. Klaus Schwab is 86. George Soros is 94. When he died in late 2023, Henry Kissinger was 100 years old. The sitting President of the United States, Joe Biden, is 82. Hollywood icon Jane Fonda is 86 years old and still doing interviews. These are not Baby Boomers. They’re even older; old enough to remember the 1930s and the start of World War II. Counterintuitively, societies are politically dominated by the old, not the young. How do low-energy elderly people enforce their will on everyone else? An elegant explanation is that exercising power requires social capital. And the best measure of social capital is age.

At 80 or 90, an elderly live player may no longer be completely lucid. But they are a wealth of favors owed and promises kept. They know where the bodies are buried—bodies that everyone else has forgotten or never knew existed in the first place. When they finally die, like Queen Elizabeth II in 2022, that ledger of favors dies with them too. Old handshake deals are finally broken. Important secrets are lost to the grave. The consequences are difficult to track because they are by nature illegible to outsiders. But we can infer they exist. Perhaps an underrated factor in U.S.-China rivalry is how many key players who brokered China’s reform and opening have died of old age in the last decade. The rest are likely to die relatively soon. Xi Jinping is, after all, the first Chinese leader born under communism.

#27 - The succession problem is a big problem everywhere. Very few live players and institutions have clear and skilled successors. The succession problem is simple but hard to solve: a live player in charge of an institution must find a successor who both has the skill to achieve the institution’s mission, and the power to actually control the institution. A stark example: in China, Xi Jinping has succeeded in centralizing power around himself. He has taken an unprecedented third term in office. But his reforms make it harder, not easier, for live players to wield power in China. As live players retire or die without being replaced, the world’s institutions will become more rigid, less responsive to changes, and thereby more brittle. The succession problem has been a problem since time immemorial. And it will be a major problem in the future.

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Samo Burja

Founder and President, Bismarck Analysis