The West’s War Machine? In the Shop. AI Will Fix Climate Change – If It Doesn’t Run Out of Energy. How Chinese Capitalism Beat Uncle Sam. #227
And how to re-invent yourself when you’re a best-selling novelist who can’t pay the bills.
Grüezi!
1️⃣ If You Want Peace, Don’t Under-Prepare For War
Europe – and the US – are finding decades of underinvestment catching up with them.
An optimistic appraisal of the Polish Army in 1939. Brits watching that in movie theatres might have been reassured. It didn’t work out that way.
Three stories combined this week to make for disturbing reading.
Franz-Stefan Gady has been talking to US military planners [German]. Its bleak:
US force projection is severely limited: Only ~25% of US forces are deployable to Europe in a crisis due to maintenance, logistics, and strategic constraints.
Europe’s underequipped: Old tanks, poorly maintained kit. Europe has only 5% of the long-range air defence systems needed to defend the Baltic states.
Europe’s troop trouble: Big gaps if facing Russian attack without full US support –Germany’s combat-ready battalions are down from 215 in 1990 to ~34 today.
Seth Jones notes in Foreign Affairs that the US military-industrial base is “crumbling.”
US defence spending is historically low: 3.5% of GDP vs. 6%+ during Reagan era and 9-11% under Eisenhower. Insufficient for great power competition.
China’s industrial surge: Producing key weapons systems 5-6x faster than the US. China now has 230x US shipbuilding capacity.
Alexandra Prokopenko once worked at Russia’s Central Bank. She writes in the FT that its economy is not about to collapse, and its military is in fact rebuilding:
Russia is entering a period of military strategic reconstruction that could last up to eight years... With a steady stream of commodity revenues, a competent economic team and escalating repression at home, the Kremlin can continue funding its war effort for the foreseeable future.
Meanwhile Europe’s political will to endure a lengthy conflict may be limited. Russia already has Hungary and Slovakia inside the bloc.
Amid all the many and pressing issues Western leaders are worrying about, this one needs to move to the top.
⏩️ Urgent action is needed to revitalise our defence industries (see the Draghi report).
2️⃣ Leave Climate Change To AI.
All it needs is massive amounts of energy and – problem solved!
Tech titan Eric Schmidt* has ‘views’ on #AI and #energy.
Power Cuts! Schmidt thinks the US will run out of power for AI in just four years.
Climate. Schmidt says “We’re not going to hit the climate goals … because we’re not organised to do it.” [40:43] He may be right, but…
AI. Schmidt thinks AI has a better change of solving our energy and climate challenges than we do.
Nukes. Undeterred by a possible Season 2 of Chernobyl, Schmidt wants old nuclear plants reopened. Renewables may be cheaper, but Schmidt says we can’t get currently solve storage issues, and apparently there’s no time for AI to fix this.
Piling on Pylon Planning Problems. Energy doesn’t transport itself. It can take over a decade to approve new power lines in the US.
International Shift. Schmidt sees Gulf states as potential leaders in AI training due to their energy resources and willingness to invest.
FWIW I think Schmidt is right on some of this stuff. But ironically this is the kind of thing we should be debating in politics.
And yet, Britain is talking about politicians buying suits, and the US presidential election has barely registered a topic of substance.
*I once sat next to Eric at a dinner. I was hoping for insights into the future of technology, but instead he lectured us on the dangers of high-fructose corn syrup.
⏩️ Eric probably won’t be around to find out what happens when the Arctic melts.
3️⃣ How Cut-throat Capitalist Competition Killed US Solar Power
‘Chinese’ Cut-throat Capitalist Competition…
You hear a lot about Chinese ‘overproduction’, state subsidies and ‘dumping’ but as David Fickling’s Bloomberg story argues, there’s one field where China’s dominance over the US is thanks to old-fashioned, market-driven capitalism.
Entrepreneurs: Chinese solar pioneers like Tongwei’s Liu Hanyuan are classic capitalist entrepreneurs. Liu, a fish farmer, saw an opportunity in polysilicon, invested heavily, and grew his business fast.
Markets: Chinese solar wasn’t a monolithic state project. At one point, there were up to 80 polysilicon manufacturers. Many failed as the market consolidated – creative destruction in action.
Private Investment: Companies mostly grew through private investment and reinvested profits, not state subsidies. Financial data shows capital costs and tax rates comparable to Western competitors.
Global Focus: Chinese manufacturers went after global markets, adapting quickly to international demand – a key trait of successful capitalist enterprises.
Economies of Scale: Chinese firms achieved dramatic cost reductions through strategies pioneered by US industrialists like Henry Ford.
Risk-Taking: Bold, risky investments in capacity expansion – often outpacing immediate demand – were buccaneering capitalist
The key difference? Whilst the US government flip-flopped, China provided a stable policy environment that gave private investors confidence to make long-term bets on solar.
Has China’s success in other key industries been misrepresented? How can Western governments create policy environments that encourage similar capitalist dynamism in strategic sectors?
Or is this really about great power competition and not economics?
⏩️ The NYT framed the story a little differently earlier this year.
4️⃣ The Myth of Micro-Growth
Why helping the little guy isn’t the answer to making poorer countries richer.
Conventional wisdom says supporting small and micro-businesses is key to economic development. Karthik Tadepalli says that’s wrong:
‘Micropreneurs’ are a myth: In developing countries, 55% of employment is self-employment (77% in sub-Saharan Africa). These aren’t budding entrepreneurs, they’re mostly just people who can’t find formal jobs.
Small companies grow slow: US firms triple in size over 10 years on average, Indian firms grow by just 20% in 20 years.
Export markets supercharge them: When Egyptian rug makers accessed export markets, they produced higher quality products, driving innovation.
He thinks we should just “kill small businesses.” But focusing on larger firm growth has its own risks:
❗ Picking winners: Government choices on which firms to support can lead to corruption and inefficiency.
❗ Political resistance: Small business owners can form powerful blocs, making reforms politically challenging.
❗ Inequality concerns: Policies that favour larger firms tend to help the already wealthy.
What are your thoughts on balancing economic growth strategies with political realities?
⏩️ India’s media loves to valorise micropreneurs.
5️⃣ Lessons From The First Energy Transition
Seeing the wood from the trees.
The first energy transition? Wood to coal. First country to do it? England.
In the late 1500s, visitors called England “one continued wood.” Today just 13% of Britain is forested, compared to nearly 40% of Europe.
The story behind this stark difference has lessons for our current energy transition.
Anton Howes spells it out:
Contrary to popular belief, deforestation didn’t drive Brits to seek comfort in coal. Instead, cheap coal actually caused deforestation.
Industries – like glassmaking – that once needed forests to fire their furnaces switched to the black stuff.
As coal became more accessible, especially in coastal areas, once profitable woodlands were turned over to farming.
This energy transition enabled a massive agricultural expansion by freeing land previously needed for log fires. In 1607 an English surveyor reckoned that within the previous two decades, woodland had receded by two-thirds.
Lessons for today’s energy transition?
New energy sources can transform landscapes and economic incentives in unexpected ways.
Energy transitions enable growth in unexpected areas.
Geography and transport infrastructure play crucial roles in the speed and scale of energy shifts.
Unintended consequences…
⏩️ Businesses like BP are ‘rolling back’ their energy transition plans.
6️⃣ Professional Self-Reinvention. Why Do We Find It So Hard?
By ‘we’… I mean men.
Keynes thought the problem of work was economic. Veblen thought the problem with economics was status signalling.
Today’s “conspicuous careerism” has taken the worst of both. We are the sum of our LinkedIn profiles.
Refreshing then to read Tom Rachman, journalist–turned–novelist, writing about self turning your back on this and transforming into something else. In Rachman’s case, a student.
I’ve always admired those who up and change. In my experience, they tended to be women, switching to something unheralded and brave in midlife, whereas men with greying hair — even when plastered with regret — seemed paralysed, as if change rhymed with shame.
My three lessons:
Your Worth Transcends Your Job Title. Easy to say. Rachman’s struggle to “pry apart” his dignity from his career as a best-selling novelist is a powerful reminder that what we have done is not who we are.
Don’t Underestimate Soft Skills. His candour about challenges with self-confidence and social interactions in his new academic environment underscore the enduring value of human qualities like adaptability and emotional intelligence.
Bridge Generational Gaps. Rachman’s experience as an older student among younger peers is a reminder as we age, that we need to forge new friendships and new relationships.
⏩️ You can pick up a copy of Tom Rachman’s much-praised ‘The Imperfectionists’ here.
7️⃣ If LinkedIn Was Real Life…
Some Australian satire.
⏩️ It turns out a few people ruin social media for the rest of us.
Thanks for reading!
Best
Adrian
