He warned of rivers “foaming with much blood” if immigration continued. He quoted a constituent who claimed that “in fifteen or twenty years’ time, the black man will have the whip hand over the white man.”1

Powell was sacked from the shadow cabinet within forty-eight hours. His political career never recovered. For decades afterwards, his name served as a one-word rebuttal to anyone who questioned immigration policy. Don’t be a Powell was the unspoken rule of respectable politics.

For decades, it held.

The rivers of blood, however, never flowed. But the politics Powell represented did.

Fifty-eight years later, the politics Powell represented has moved from the margins into government across much of the developed world. Italy elected a prime minister who campaigns on blocking migrant boats. Denmark’s Social Democrats — the left, not the right — now run on restricting asylum. Britain voted to leave the European Union largely over freedom of movement. In Germany, the AfD draws crowds that would have been unthinkable a generation ago.

Now I want to suggest something uncomfortable.

This current anti-immigration sentiment across industrial nations is understandable. It emerges from legitimate fears.2 But it’s also arriving just as the ground beneath it begins to shift. The countries now trying to restrict immigration are the same countries that will soon need migrants most. Today’s restrictionists may be right about the pressures immigration creates. They may simply be late to the next problem.

Let’s start with the fears, because they’re real.

When a Frenchman worries about immigration changing his country, he isn’t necessarily suffering from irrational bigotry. He’s noticing something true. Immigration does change countries. That’s the point.

But is the change welcome? That’s the bigger question. More importantly, it’s a political question, not a moral diagnosis.

If you dig a little deeper, beneath the catchy slogans, beneath the cultural anxiety, there lies something more primal. Resource competition. It’s true housing costs have exploded across the developed world. It’s true wages for working-class jobs have stagnated. It’s also true public services strain under higher demand. When a British pensioner waits three weeks for a GP appointment, telling her that immigration boosts GDP, or that there are profound systemic factors at play in housing costs, doesn’t address her lived experience. She’s not calculating macroeconomic aggregates. She’s competing for a scarce appointment.

These fears then compound into something deeper: the sense of losing control.

Borders are the most basic assertion of sovereignty — the line where we decide who enters and who doesn’t. When that line feels porous, when decisions seem to happen elsewhere, when the composition of your neighbourhood changes faster than you can adjust, the psychological experience is one of dispossession. Not necessarily accurate. But not irrational either.

The populist right understood this before the technocratic centre did. They offered a simple story: your leaders gave away your country without asking you. The story was partially true.

Here’s what the restrictionists haven’t reckoned with, though: demography doesn’t negotiate.

The industrial world is shrinking — not metaphorically. Literally. South Korea’s fertility rate has fallen to 0.80, far below the 2.1 replacement levell. Japan’s population peaked in 2010 and has declined every year since. Deaths have exceeded births in Germany since 1972, and the UK is projected to follow from 2026. By 2030, on the Congressional Budget Office’s own projection, the United States will join the list. Spain, Portugal, Greece, Hungary, Russia, Thailand, Taiwan, and China are already there.

These are today’s numbers, already baked into tomorrow’s workforce.

A wave that began in 2011 is nearing its end. Baby boomers are leaving the workforce en masse. Here in Australia, industry estimates suggest they will be largely gone from workplaces by 2028 or 2029.3 The exact date matters less than the direction. The largest post-war generation is moving from production into retirement.

That creates a problem no government can message its way around.

A country can survive an ageing population if it has saved enough to support retirees. Most haven’t. The developed world has instead accumulated debt — promises to pay future pensions and healthcare costs that assume future workers will exist to fund them. America’s Social Security trust fund faces depletion by 2033. France’s pension system nearly triggered revolution in recent years. Japan’s debt-to-GDP ratio exceeds 230 percent, the highest in the developed world.

Fewer workers means a smaller tax base. A smaller tax base means either benefit cuts or higher deficits. Benefit cuts mean political revolt from the elderly, who still form a large voting bloc. Higher deficits mean either inflation, or borrowing costs that crowd out everything else. Inflation means everyone blames the government.4 This is the squeeze.

More care. More health. More maintenance. More public spending.

Fewer workers to provide it.

Yes, automation helps, but it doesn’t solve the problem. You can automate parts of finance, administration, manufacturing, agriculture, logistics, and software. You cannot, however, fully automate a nurse turning a patient, a builder repairing a roof, or a carer helping an eighty-six-year-old shower.

While machines reduce labour in some places, they still need capital, energy, maintenance, regulation, trust, and deployment at scale. They do not become taxpayers. They do not vote. They do not replace judgement, touch, language, trust, or presence.

When you squint long enough, you’ll see that other levers exist. But immigration is the only one that moves fast enough to matter.

Fertility policy, for example, can move the numbers. But only slowly. You’d need to get the settings right on housing, childcare, work culture, gender norms, and family policy. Even then, the gains arrive unevenly and expensively. Most pronatalist policies, in my view, tend to manage symptoms rather than root causes. Take these two countries, for example: Hungary spent five percent of its GDP on family-friendly initiatives. South Korea spent $270bn over two decades. Both have struggled to move the numbers meaningfully.

Furthermore, a baby born because of a successful policy in 2027 doesn’t staff an aged-care home in 2028. You can, however, admit a twenty-five-year-old engineer from Mumbai, a nurse from Manila, or a builder from Auckland tomorrow, and they’ll be paying taxes next month.

This is the argument the current politics can’t yet absorb.

The same governments now campaigning on restriction will eventually pivot to recruitment. Their rhetoric will change from “controlling our borders” to “winning the global talent race.” They won’t announce the reversal.

They’ll rename it:

Strategic migration. Skills attraction. Workforce resilience. National capability. Big [insert country name].

The restrictionists will say they always supported the right kind of immigration. And, in a narrow sense, they’ll be telling the truth. This is why the reversal won’t arrive evenly. It will arrive sector by sector, crisis by crisis.

First in hospitals. Then in aged care. Then in construction. Then in defence. Then in universities. Then in logistics. Then in public finance.

Australia has already shown the direction of travel. The Australian Defence Force has opened eligibility to certain permanent residents from New Zealand, Britain, America, and Canada because it cannot meet its personnel needs through citizens alone.

The military, I think, is the hardest test of the argument.

It is the institution most wrapped in sovereignty, loyalty, citizenship, and national identity. If even that institution widens the labour pool sources, the broader economy is unlikely to hold the old line.5

When we get to that point, immigration stops being a culture-war accessory and becomes state capacity.

But can every country compete?

The shorter answer is no. The longer one carries more nuance. The coming scramble for talent will be ruthlessly unequal.

The world still votes with its feet. People don’t cross deserts or oceans for abstract GDP. They move towards countries where work, safety, reinvention, and belonging still seem possible.

Which countries can still offer that?

Once labour becomes scarce, the answer shifts to favour the talented and the skilled. It’s no longer only which countries need workers. Almost all ageing countries will. The harder question is what kind of life they can offer to the workers they need.6 The most capable migrants will be spoilt for choice.

Yes, a country’s wealth will matter. Of course it will. Wages, hospitals, schools, amenities, safety, and currency strength all shape where people go.

But wealth won’t be the only divide.

Once several ageing countries are bidding for the same workers, the competition moves beyond wages. Can they build a life there? Can their children become fully of the place? Or will they remain useful, tolerated, and permanently outside?

Wealth decides who can bid.
Belonging decides who can keep people.

Countries will sort themselves by how they answer those questions:

In settler nations, belonging is acquired.
In ancestral nations, belonging is inherited.
In civic-assimilation nations, belonging is conditional.
In administered-labour states, belonging is stratified.
In composite nations, belonging is negotiated.

Let’s take a closer look.

Settler nations — particularly the United States, Australia, Canada — hold two structural advantages.

First, space. Not empty space, and not innocent space, but space nonetheless. Australia’s population density is around three and a half people per square kilometre; the Netherlands is above five hundred.

Second, settler nations possess a cultural metabolism that digests difference within a generation or two. The proverbial melting pot melts.

Grandchildren speak English. The origin culture survives as cuisine, surname, festival, and family memory. The deeper structures — language, religion, social organisation — sometimes soften, often hyphenate, and more commonly dissolve into the host. And yes, this is a kind of erasure. Sometimes chosen. Sometimes pressure-cooked, in playgrounds or workspaces. But often rewarded. Belonging is acquired.

This gives such countries an enormous competitive advantage.

Germany could absorb large numbers legally. But can its social imagination of Germanness move at the same speed? Australia and America can, and have, and will again.

Nations that promise real belonging, not permanent outsider status, win the talent wars. Nations that cannot will get whoever is left.

Ancestral nations face the opposite problem.

Japan, Korea, Hungary, Denmark, and others root identity in language, ancestry, ethnicity, and deep history. History often formed through self-organisation against a common external enemy.

You can live in Japan for thirty years, speak fluent Japanese, raise children there, and find that belonging remains conditional. Prejudice may exist, but the deeper force is a different theory of membership.

Belonging is inherited, not acquired.

Ancestral nations can accept workers. They struggle to accept members. That limits their appeal to migrants with options. Why move somewhere your grandchildren may still be outsiders?

The ambitious choose destinations where belonging feels possible. Ancestral nations risk attracting those with fewer options, shorter horizons, or more transactional reasons to stay. When competing for talent, they start behind.

Yes, but there’s a small caveat:

A shrinking country can do more than open its borders. It can, for example, send its balance sheet overseas instead. We’re looking at Japan here. Where people are hard to import, capital can still travel. This buys exposure to younger markets and other people’s labour systems.7 A country like Japan therefore has four levers — automate what it can, offshore the work that can leave, buy growth abroad, and import the workers it will tolerate. Japan has done the first three at scale, which is precisely why it can hold the line others will abandon.

But the capital lever is a creditor’s option. It requires cheap money and deep domestic savings. Countries that chose debt over savings can’t send abroad a balance sheet they do not have.8 And not even Japan can buy the one thing the ageing wave most demands. Capital can acquire a Melbourne builder’s earnings to fund a pensioner’s cheque. It cannot acquire the nurse who turns that pensioner in the night. That’s where the levers narrow to one: for in-person care and other human-dependent roles, immigration really is the only thing fast enough.

Civic-assimilation nations occupy a more complicated middle ground.

France is the classic case. Germany is the test case.

Outsiders can become insiders through a demanding civic bargain: learn the language, accept the civic order, submit to the national template, and eventually you may belong.

France’s promise is that anyone can become French. Its tension is that becoming French often requires leaving too much at the door.

Given its origin story, Germany historically leaned ancestral. Belonging carried the weight of descent, language, and bloodline. But modern Germany is trying to legislate its way into a more immigration-capable state. Its 2024 citizenship reforms shortened the ordinary naturalisation period and expanded dual citizenship. The law is moving towards acquired belonging because the labour market needs it to. But can law move faster than culture?

Citizenship can be amended by parliament. Belonging cannot.9

Administered-labour states show the dark alternative.

Singapore and the Gulf states demonstrate that a country can import workers without importing citizens. It can offer wages without membership, residency without political voice, usefulness without belonging.10 It can stratify the population: citizen, permanent resident, skilled expatriate, temporary worker, domestic worker, construction worker.

Everyone has a place. Not everyone has a future.

This model will tempt ageing societies more than polite people admit. It’s efficient. It’s controllable. It’s morally uncomfortable. And in a world where voters want workers but not newcomers, I see it becoming more attractive.

Composite nations occupy stranger ground.

Kenya, Nigeria, South Africa, and many post-colonial nations should be ancestral states, but it’s not that simple. To be clear, their peoples are not invented. Kikuyu, Luo, Kalenjin, Maasai, Yoruba, Igbo, Zulu, Xhosa, and others have deep histories that predate the modern state by centuries.

What is constructed is the container: Borders drawn through external imperial bargaining, colonial administration, and post-colonial compromise.11 The nation is real, and still unfinished. Part ancestral, part civic-assimilation. A project being negotiated in realtime.

For now, since many composite nations still have population pyramids that look like pyramids rather than chimneys or mushrooms, they are talent sources, not destinations. Their ambitious young leave for London, Toronto, Dubai, Sydney, and Houston.

But the absence of pure ancestral-nation mythology gives some of them a latent advantage. A Kenya that builds deeper stability, stronger infrastructure, larger capital pools, and broader opportunity could absorb Congolese, Ethiopians, South Sudanese, Ugandans, or Somalis without the same anxiety immigration triggers in, say, Denmark or Japan.

There would still be friction. There would still be politics as we’ve seen in South Africa. But the psychological starting point would be different.

The challenge is scale.

My thought bubble 💭

One nation is positioned to win this competition decisively, if it doesn’t sabotage itself. The United States.

America’s advantages are so profound they risk becoming invisible. English is the global lingua franca — no language barrier for the world’s educated. The university system draws international students who become immigrants. Existing diaspora networks span every origin country on earth. The mythology of American reinvention remains potent, even as the reality frays.

More importantly, America has done this before. It has absorbed large migrant populations under stress, turned outsiders into citizens, and converted immigration into national power. The process was never gentle or costless. But it worked often enough to become part of the country’s operating system.12

The current restrictionist moment—Trump, the border panic, the political salience of illegal crossings—obscures a structural reality. America remains the world’s most desired destination. People are not risking death to reach Poland. They’re not crossing deserts to enter Japan. The ‘crisis’ at the southern border is, viewed differently, a testament to American magnetism.

When the reversal comes, America will pivot faster than its competitors. It will skim the best talent from the global pool — the entrepreneurs, inventors, scientists, artists, engineers, and doctors — while leaving harder-to-integrate populations to rivals with fewer options.

The same nation that built its twentieth-century dominance partly on immigrant talent will repeat the trick in the twenty-first.

The bigger big picture

The global talent competition will transform the machinery of government.

Governments that once outsourced labour recruitment to market forces will build active acquisition systems: talent scouts in foreign universities, expedited visas for priority skills, relocation subsidies, credential-recognition agencies, language programmes, housing pathways, integration offices, settlement infrastructure.

Some of this already exists. Germany’s Federal Employment Agency runs international recruitment offices. Australia’s National Innovation Visa, launched in late 2024, bypasses normal visa channels for exceptional talent.

Immigration will become industrial policy.

Government will grow to manage what it once restricted.

And here’s the dark irony: the very expansion of government capacity required to compete for immigrants will sow seeds for future backlash. Larger bureaucracies become engines for their own perpetuation. They create stakeholders who lobby for expansion. Housing shortages become the fault line between newcomers and incumbents. Public services become the arena where demographic necessity meets local resentment.

The machinery built to attract workers won’t easily shrink when the need diminishes. Today’s urgent solution becomes tomorrow’s permanent obligation.

The countries that “win” the immigration competition will discover they’ve also won a bigger, more expensive, more intrusive government—one that voters will eventually resent. Thereby creating the conditions for the next populist backlash.

So the cycle will continue.

Restriction, then reversal, then expansion, then resentment, then restriction again.

Each turn of the wheel leaves the state a little larger, the politics a little more volatile, and the underlying demographic problem still unsolved.

I began with Enoch Powell because his trajectory illustrates something about the politics of immigration: Today’s taboo becomes tomorrow’s consensus, and tomorrow’s consensus becomes the day after’s anachronism.

Powell warned against immigration and was exiled. His heirs now lead governments. But their victories may prove brief, because demography bends politics eventually. The restrictionists won the argument just in time to discover the argument had changed.

The industrial world is ageing into contradiction. Its voters want fewer immigrants. Its economies need more workers. Its retirees need more services. Its militaries need more recruits. Its treasuries need more taxpayers. Its care systems need more hands.

The great reversal is coming. Within the next five years, governments will be competing for the immigrants they currently turn away. It will happen faster, stranger, and with greater consequences than the restrictionists imagine.

They built walls just as the labour market began demanding doors.

Notes

We talk endlessly about housing affordability in numbers. Median prices, mortgage rates, percentage of income spent on rent. We draw graphs and debate policy. And yet something essential keeps slipping through our fingers, the way water escapes a cupped hand. Because affordability was never truly about dollars.

It is about permission.

Consider what happens inside a person when they sign a long-term lease or receive keys to their own home.

Something shifts in the core of their thinking.

Suddenly, tomorrow becomes real. Next year becomes imaginable. A decade from now transforms from abstract fog into something with texture, with possibility. This is not merely optimism. It is the psychological foundation upon which we build everything else—our relationships, our ambitions, our willingness to invest ourselves in a community. When we know where we will wake up in five years, we plant differently. We root.

But when housing remains perpetually out of reach, something else happens. The future contracts. Dreams begin to feel like luxuries reserved for other people. The young couple delays marriage. The young couple then delays having kids because they cannot imagine where they would live as a family. The would-be entrepreneur never starts the business because there is no stable ground from which to take the leap. The artist abandons the studio for a second job, then a third, just to stay afloat.

Life becomes a series of deferrals, a constant postponement of the self one hoped to become.

Seventy-one percent of aspiring homeowners are currently holding off on at least one major life decision—marriage, children, career changes, even pet adoption—because they cannot afford a place to call their own. This is not a statistic. It is a generation learning to shrink their dreams to fit their circumstances. And when dreams shrink for long enough, we forget they were ever larger.

Here is a truth we rarely speak aloud: housing affordability does something peculiar to self-worth. When the market tells you, month after month, year after year, that you cannot afford to belong somewhere, a darker narrative begins to form. Perhaps the problem is not the prices.

Perhaps the problem is you.

This is irrational, of course.

The forces that shape housing markets are vast and impersonal—decades of policy decisions, global capital flows, the physics of supply and demand. But the human psyche does not process structural economics. It processes feeling. And the feeling of being unable to secure shelter, that most fundamental of needs, carries an ancient weight. It whispers of inadequacy. Of failure.

I have watched this happen. Capable, intelligent, hardworking people begin to question themselves, not their circumstances. They stop applying for better positions because what is the point if they cannot afford to live near the office anyway. They withdraw from friendships because shame is a solitary emotion. They date less, commit less, hope less. The unaffordability of bricks and mortar becomes the unaffordability of imagining themselves as deserving. Worthy. Enough.

This is not weakness. This is what happens when a basic human need remains chronically unmet. We adjust. We adapt. And sometimes, tragically, we accept limitations that were never truly ours to accept.

There is a particular cruelty to dreaming when you cannot afford to dream safely. The young person scrolling through property listings at two in the morning knows this intimacy well. Each photograph of a sunlit kitchen or a garden with space for children becomes both invitation and accusation. This could be yours whispers the image. But it will not be answers the bank balance.

So we learn to dream with one eye on the emergency fund, one foot out the door. We learn to love places without becoming attached, because attachment makes the leaving harder. We learn to call somewhere home while knowing it is only ever temporary. And this guarded relationship with space extends outward into every other relationship we build. How do you trust a neighbourhood when you might be priced out next year? How do you invest in community when community keeps being gentrified out from under your feet?

The anxiety is not hypothetical. Research confirms what the body already knows: housing affordability stress—that chronic, gnawing uncertainty about whether you can continue to pay for where you live—damages mental health with the same persistence as physical illness. Depression. Social isolation. A sense of powerlessness that seeps into every corner of life. And unlike a broken bone, this damage often goes unseen, accumulating quietly over years.

Now widen the lens.

What happens to a neighbourhood when half its residents are temporary? When the schoolteacher who shaped a generation of children can no longer afford to live near the school? When the artist who gave the district its character is displaced by the very desirability they helped create?

Communities are not buildings. They are the invisible threads between people who have stayed long enough to know each other’s names, each other’s stories, each other’s sorrows. These threads take time to weave. They require the slow accumulation of shared meals, borrowed sugar, children growing up together, hands offered during difficulty. When frequent moves become the norm, when housing instability scatters residents like leaves before wind, these threads never form. Or they form briefly, beautifully, and then snap.

What remains is something that looks like a neighbourhood from the outside but feels like a collection of strangers from within.

Beautiful facades. Pristine streets. And behind every door, people who do not know the face of the person next door. We wonder why anomie has become epidemic, why isolation gnaws at us even in the most densely populated cities. Perhaps part of the answer lives here. Here in the spaces where belonging should be but is not.

Children feel this most keenly, though they lack the words to name it. The constant moves. The new schools. The friends left behind again and again until forming friendships begins to seem pointless. They absorb their parents’ stress like sponges, reading anxiety in the tension around dinner tables, in the hushed arguments about money that drift through bedroom walls after lights out.

And they learn. Not consciously, not deliberately, but in the deep way that shapes a life from the inside. They learn that home is precarious. That stability is a privilege. That wanting things is dangerous because wanting leads to disappointment. These lessons calcify into beliefs, and beliefs become the scaffolding upon which an entire adulthood is constructed. Anxious children become anxious adults become anxious parents, passing the inheritance forward.

The cycle turns.

But let us return to something simpler. Older. What is home, really?

Not the building. Not the mortgage document or the lease agreement. Something deeper. Home is the place where we are permitted to be fully ourselves. Where we can close the door on the performing self we present to the world and simply... exhale. It is the kitchen where we learn to cook our grandma’s recipes, the room where we rock our children to sleep, the garden where we measure the years by the height of the trees we planted.

Home is where we become who we are.

Strip this away—render it temporary, conditional, forever under threat—and something fundamental shifts in human identity itself. We become visitors in our own lives, guests in spaces that should be sanctuaries, tenants not just of apartments but of our own sense of self. The psychological weight of this cannot be overstated. Without stable ground, the whole edifice of identity wobbles.

So perhaps we need to reframe the conversation entirely. Affordability is not an economic metric to be optimised. It is a human experience to be honoured. When we ask whether housing is affordable, we should not be asking merely whether people can pay the bills. We should be asking:

1. Can they imagine a future?

2. Can they feel worthy of stability?

3. Can they dream without fear?

These are not soft questions. They are structural ones, as concrete as any foundation. Because a society that cannot provide its members with these basic psychological certainties is a society building on sand, no matter how impressive its skyline.

And yet. There is hope here, folded into the difficulty like light hidden in dark cloth.

Because naming something is the first step toward changing it. When we recognise that housing affordability is fundamentally about belonging—about the deep human need to have a place in the world—we begin to see solutions we might otherwise have missed. Not just more buildings, though we need those. Not just subsidies and policy tweaks, though those help too. But something more radical: a reimagining of what we owe each other.

We are social creatures, you and I. We evolved in tribes, in villages, in communities where belonging was a birthright rather than a purchase. The privatisation of shelter into a purely market commodity is, in evolutionary terms, a very recent experiment. And the results are coming in. They do not look good.

But experiments can be revised.

Directions can be changed. The story we have been telling ourselves—that home is a commodity, that security must be earned, that belonging can be priced out of reach—is just that: a story. And stories can be rewritten.

Imagine, for a moment, a different architecture. Not of buildings, though that matters too, but of assumptions. An architecture in which every person’s need for stable shelter is treated as legitimate—not as a reward for financial success, but as a foundation upon which success becomes possible. An architecture in which communities are designed for continuity rather than churn, where neighbours have time to become friends, where children can count their growth in familiar doorframes.

This is not utopia. It is simply the recognition that certain things are too important to be left entirely to markets. That belonging matters. That the feeling of having a place in the world is not a luxury but a necessity. And that when we deny this necessity to too many people for too long, something precious begins to fray in the social fabric itself.

The young person at the kitchen window, calculating their future against their bank balance, deserves more than anxiety. They deserve to dream. Fully. Without apology. Without the constant undertow of fear pulling them back from the shore of their own potential.

This is not a small thing to ask. It is, in fact, everything.

Because in the end, affordability is not about what we can pay. It is about who we are allowed to become. And that—that—is a question worth everything we have to give it.

—

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(Aileen Lee is the founder of Cowboy Ventures.)

This year, she revisited her unicorn analysis with fresh data and perspective.

As expected, a lot has changed over the 10 years.

But as an interested industry watcher, a few trends and observations caught my eye.

Here are 8 of them:

1. The unicorn population grew 14x (from 39 to 532). At this rate, US is on track to house ~1,400 unicorns by 2033. "As compute capacity, capability and usage increase, unicorns grow as well."

2. She underlines a new breed of unicorns. First, there are the "ZIRPcorns", a staple in the new group (about 60% of them). These are startups that rode high on easy money. They were last valued in 2020-2022 when we still had zero interest rate policies floating around. It also the period where almost all assets were at ATH, or heading to the moon. Now with increasing interest rates (and if the recent tech layoffs are any indicator, ) many in this group may be endangered species.

3. Then you have "Superunicorns" — companies valued at US$100B or more. This decade, OpenAI is likely to be the first to get this crown.

4. AI looks to be the megatrend for this decade. This supplants the SoMoCo trifecta megatrend from 10 years ago — i.e. Social networks (e.g. Facebook, Pinterest), Mobile (e.g. Uber, Square) and Commerce (e.g. Groupon). Other emerging trends in the 2023 list include last mile delivery (e.g. DoorDash), health (e.g. Cityblock Health), web3 (e.g. OpenSea), and gaming driven platforms (e.g. Discord). All seemingly propelled by new habits formed during COVID.

5. I found her observations on Founder profiles to reassuring. The average age is 35, at founding. And the sweet spot seems to be 3 co-founders. Not many changes here.

6. Capital efficiency appears to be coming back in vogue. This is evidenced by a swing to B2B business models (78% of the companies in the updated list.) Back in 2013, B2C models were more dominant. She explains why in the article.

7. 7 years appears to be the typical unicorn incubation period. By contrast, premature unicorn status can spell trouble e.g. the fast rise and fall of Hopin.

8. Female founder representation saw slight improvement, from 5% to 14%. At this pace, Lee notes that parity may come in 2063.

Lee's write up and updated analysis offers an insightful retrospective on key shifts in the startup landscape over the past 10 years, while identifying emerging trends to watch going forward.

Read her full 22 page analysis here:

https://www.cowboy.vc/news/welcome-back-to-the-unicorn-club-10-years-later

Dear sublime reader,

In 1945, there were only 7 border walls. By the end of the Cold War, this number had increased modestly to just over a dozen.

Since then, we've seen a proliferation of walls separating nations around the world. The wall count hovered at 77 just before the pandemic struck in 2020. With an additional 14 either proposed or under construction in the years after.

What seemed like a wildcard from the U.S. president in 2016 (U.S. — Mexico border wall) is now prevalent across the globe. From Finland, Poland, Ukraine, and Greece in Europe; to India, Turkey, Saudi Arabia, and Israel in Eurasia, the landscape is changing.

A few things to note:

• Reasons for Border Walls: Regions build border walls for varied reasons. They might want to prevent smuggling and illegal activity, reduce migration flows, stop violent non-state actors, increase post-conflict security, and/or prevent wildlife from entering certain territories, as is the case with Denmark.

• Border Walls Are Expensive: Some of these walls, barriers, or fences can be lucrative infrastructure contracts. For instance, the Arizona-Mexico wall (made of shipping containers) came at a cost of US$123.6 million as per the state’s contract with AshBritt. Spain's 3-meter-high fence had a US$35 million price tag. And in 2022, Lithuania and Poland spent €172 million and €353 million respectively to fortify their borders with Belarus.

• Maintenance Costs Aren’t Cheap Either: In 2017, the U.S. Department of Homeland Security pegged border wall maintenance at US$274 million. Israel's annual bill for its West Bank fence? US$260 million (average) since 2014. The cost of barriers goes beyond steel curtains or bricks and mortar.

• Effectiveness: Do walls solve the problems they were intended to address? Your guess is as good as mine. The effectiveness of the walls is yet to be determined. Studies and analyses are needed to gauge their success in achieving their intended purposes.

Between the lines: The decision to build a border wall isn't simple; it's shaped by the balance of power between bordering countries, how neighbors act (or perceive each other), and significant international events, such as war, natural disasters, terrorism, or mass migrations.

My Thought Bubble 💭

This was an interesting find I stumbled upon while working on another essay. From an engineering perspective, some of these projects can be quite a feat, and indeed the fee for constructing something to marvel at, is substantial.

However, from a humanitarian point of view, they do raise serious concerns, such as privacy infringement, the potential for increased isolation, and disruption of communities. Not to mention potential human rights violations.

• Some institutions, such as Norway’s national pension fund system, HSBC, have divested from Elbit Systems due to “serious violations of fundamental ethical norms as a result of the company’s integral involvement in Israel’s construction of a separation barrier on occupied territory” in the West Bank.

Here’s a peculiar observation I couldn't shake off: Border walls are rising in unexpected places. Europe, once home to the Berlin Wall—a symbol of oppression—is building anew. Even the United States, a traditional champion of free trade and global stability, is joining in the journey to a walled world.

Looking ahead: The future of Border walls

As we navigate the 21st century, there's a noticeable shift from physical to Digital or Virtual border walls. Instead of steel curtains or bricks and mortar, nations are employing a combination of technologies to monitor, identify, and alert authorities when people are crossing the border.

• These tech systems can include drones, Remote Video Surveillance Systems, Autonomous Surveillance Towers, Automated License Plate Recognition, Biometrics (e.g., facial recognition), Integrated Fixed Towers (with day/night cameras and radar that can identify people 10 km away), and Mobile Video Surveillance Systems.

• While these Digital Walls can help with dematerialisation, they come at a sizeable price tag too. Elbit Systems, for instance, inked a $239 million deal for the development of Integrated Fixed Towers along the U.S. - Mexico border; and military contractor General Dynamics has a contract worth $153 million through 2023 to expand the Remote Video Surveillance System along the same border.

• Note that some of these technologies are used (and if not, will eventually seep into) for internal use within the borders. The Automated License Plate Recognition System, for example, relies on Motorola Solutions' database of 5 billion license plate records.

  
  

The proliferation of border walls from 7 to 77+ since World War II ended reveals much about our changing world.

While the engineering behind these structures may be impressive, the underlying reasons and the broader implications of such walls demand careful consideration. In an era marked by global challenges and shifting power dynamics, these walls stand as symbols of both connection and division, reflecting complex social, political, and economic realities.

Perhaps—

This trend points to the era of a ‘Global Village’ entering its sunset years.

Go deeper: Borders, Fences, and Walls: State of Insecurity? (Book)

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On 8th March this year, the United States released its annual threats assessment for 2023.

While much of the focus is on the usual adversaries— Russia, China, Iran, and North Korea—there are a few interesting items that deserve attention. 

One of the most significant is the threat posed by climate change, which receives more coverage than even nuclear proliferation.

Last year's Annual Threat Assessment on the topic focused on ecological degradation and its potential to fuel disease outbreaks while threatening food and water security. This year, the assessment takes a slightly different view, opting to concentrate on four primary flashpoints.

Firstly, as nations endeavour to fulfil the objectives of the Paris Agreement, they will likely argue over how to reduce greenhouse gas emissions.

• This could lead to an increase in geopolitical tensions.

• The debate will focus on who should take more action and pay for the clean energy transition and how quickly this should happen.

• Countries will also compete for control of resources and new technologies required for this transition.

Secondly, there is the risk of conflict arising from countries stepping on each other's toes as they compete for essential resources such as water, arable land, and the Arctic.

Thirdly, there are tensions over climate financing—centred on the unfulfilled pledge of $100 billion per year to low-income countries.

Finally, the extent of human displacement caused by climate change. Coupled with shrinking global trade as the frequency of climate-related disasters continues to increase.

The annual threats assessment is always an engaging read for big-picture insights, providing a peek into what keeps NSID officials up at night.

It seems we’re moving into an era where climate considerations creep into the geopolitical landscape.

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Dear sublime reader,

The ongoing housing crisis a tough nut to crack. Akin to solving a Rubiks cube with one hand, while blindfolded.

It is a multifaceted issue that affects a lot of people (politicians, bankers, planners, homeowners, renters, developers, quantity surveyors, etc) of groups, each with their own:

• opinions

• perspectives

• vested interests

Which means tackling the problem is an enormous undertaking.

The question then arises: where do you even start?

of offers a beacon of clarity amidst this head-scratcher.

He has crafted a compelling visual that illuminates various dimensions of the crisis and presents potential strategies to navigate through them..

You can go deeper here:

The Emergent City

The Housing Crisis is a Wicked Problem

Something I've noticed about the housing crisis debate is that there's very little public understanding that the issue is a Wicked Problem. That is: a problem that's difficult or impossible to solve, because of its complex and interconnected nature…

Read more

3 years ago · 2 likes · 1 comment · Riley Flanigan

My thought bubble 🗯

I'm a big fan of looking at the bigger picture, and it's great to see this mental model used to solve problems.

Zoom out, then zoom in.

The way today's image describes big, tough problems is a great new way to think about the housing crisis. It's not just a problem to be fixed, but a whole system to be understood.

And that might just be the key to finding the right solutions.

Stay sublime,

KM

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Dear sublime reader,

Our world is ablaze — not with the physical flames of bombs and bullets, but with the silent, invisible fury of algorithms waging war.

The battlefield is shifting from dusty trenches and open skies to the humming servers and glowing screens.

In this reality, the coder is the new soldier, the keyboard their weapon of choice, and victory is claimed by those who can master the matrix of digital warfare.

This is not a dystopian future—it's our present, raw and unfiltered.

Reflect on these sobering insights:

• Alexander Chartes, Investment Director of Ruffer Investment Management, revealed: “Ukraine is simultaneously the last war of the twentieth century, featuring artillery duels and trench warfare, and the first major war of the twenty first: drones, networked warfare and portable precision-guided missile systems are coming of age.”

• Alexander C. Karp, Chief Executive Officer & Co-Founder of Palantir Technologies Inc., an industry titan in data analytics and AI, wrote: “The stories offer accounts of the dramatic shift in the way wars are now fought, underscoring the moral and philosophical questions that arise from deploying a software system that can systematically identify and eliminate an enemy from afar. We acknowledge that the ethical challenges that the use of our software raises are significant. But the stakes could not be higher, and the costs of inaction are real.”

These words echo the transition of warfare from the physical battlefield into the digital arena—a shift that brings with it a host of ethical trilemmas.

Question is: Are we prepared to navigate the murky waters of wars waged in bytes and binary?

When Machines Start to Feel More Human than Software

Looking at generative AI as more human than software could be a game changer. Ethan Mollick in "One Useful Thing" pitches a practical approach that makes AI more digestible for the non-tech crowd. Here's the breakdown:

1. The new lens: Traditional software typically churns out the same result every time you run it. Not so with generative AI, which varies its output based on factors like the quality and structure of the prompt you give it.

2. The strengths: Generative AI excels at human-like tasks, such as writing, coding, and conversational interactions. These are the areas where AI really starts to shine.

3. The weaknesses: On the flip side, generative AI struggles with machine-like tasks - think calculating without a calculator or executing repeatable processes.

4. In a nutshell: it's time to reimagine our understanding of AI. This human-centric viewpoint could be just the key to unlocking its potential.

   ---

The Power of Your Brain's 'Screen Saver' Mode

Ever found yourself zoning out and wondered what your brain was up to? According to Renee Aharon in "The Human Experience", it's not just idling away. Your brain has a 'screen saver' mode, staying active even when you're not.

1. The concept: Just like your computer's screen saver kicks in when it's idle, your brain also has a 'default mode' that it slips into when you're zoned out.

2. Behind the scenes: This default mode is tied to the activity of your Default Mode Network. It's a bit like having a team working behind the scenes, even when the main show's not on.

3. In essence, your brain is a bit of a workaholic, never fully switching off. Next time you find yourself daydreaming, remember: your brain's still hard at work in the background. Who knows, it might even be solving the world's next big problem while you're lost in thought. I suspect that’s when more “eureka!” moments come to us.

   

   ---

The Battle Between Efficiency and Lean/Fat Ideas

Innovation is a broad territory, and Benjamin Reinhardt in "The Green Dragon" offers a fresh perspective on the landscape. He categorises ideas into 'lean' and 'fat', each with its own distinct footprint:

1. The categories: Lean ideas are resource-efficient — 1 unit or work can create 1000 units of value. On the other hand, fat ideas gobble up a lot more resources (100 units of work to create 1100 units of value). Don't be fooled though - both types can deliver similar value.

2. The implications: Resource efficiency doesn't always equate to the value created. Sometimes, it's the fat ideas that lead to significant breakthroughs, despite their resource-hungry nature.

3. Bottom line, it's about playing the right game with the right ideas. But remember, not all fat ideas are bound to be successful, and not all lean ones are destined to be small. As innovators, we must strike a balance and be ready to bet on both lean and fat ideas. After all, innovation isn't a one-size-fits-all journey.

   ---

'Zombie Buildings' Looming in Our Post-Pandemic World

Pandemic-triggered remote and hybrid work hasn't just changed how we work, it's also left a trail of what BCG dubs as "Zombie Buildings" in its wake. Here's the lowdown:

1. The surge: Remote and hybrid work trends spiked during the pandemic but have also shown staying power in many regions around the world.

2. The side effect: The rise of under-utilised office spaces, or "Zombie Buildings," is a knock-on effect. Office buildings are sitting idle, echoing the economic slowdown is urban centres during lockdowns.

3. The cost: If these trends continue, we could see 1.5 billion square feet of office space turning obsolete. The potential revenue loss for building owners? A staggering US$40-60 billion. (U.S. based studies)

The take-home message here is clear. The remote work revolution is not just about home offices and Zoom calls. It's also re-shaping our urban landscapes, leaving us with 'Zombie Buildings' that could be a stark reminder of the pandemic's impact for years to come.

I'd love to hear your thoughts. What was the most fascinating article you read recently?

In just two months, we've seen a staggering $500 billion+ in bank failures.

This is a chilling reminder of the 2008 financial crisis. This situation is so alarming that some investors are now more concerned with securing a return of their original investment, rather than seeking a return on their investment.

The Federal Reserve’s rate hikes have triggered a domino effect, leading to the collapse of Silicon Valley Bank and other banks. More regional banks are teetering on the brink.

The pace is quicker, the scale larger. The fallout from the few bank failures in the past six weeks already dwarfs the 25 during the 2008 crisis. If history repeats itself—

What's looming in the coming years?

Despite these signs, there are optimists like Jerome Powell talking about soft landings. Are we in denial, or can we still hope for a gentle descent? As others have pointed out, the parallels with 2008 are striking.

An interesting twist this time around is the emergence of Central Bank Digital Currencies (CBDCs). This reminds us of the emergence of Bitcoin in 2009, another innovation that was born out of financial crisis…

My though bubble:

Could CBDCs offer a solution to such crises? Or could they add another layer of complexity to an already tumultuous situation?

In 2022, we finally got to see AI live up to its hype.

I remember being sceptical about how it would impact the workforce, but my recent experimentation with various AI products has completely changed my perspective.

ChatGPT from OpenAI, VALL-E from Microsoft, Foundry from Palantir, and Midjourney are just a few examples of the incredible capabilities of AI.

I was blown away by what ChatGPT can do: craft product roadmaps, generate scripts, debug code, role play as a McKinsey consultant, hallucinate fiction, and so much more.

It's like having a generalist colleague on call 24/7. So now it's part of my daily workflow.

I'm obviously downplaying the potential for its misuse and flaws — an entirely vast topic in itself. And the fact that it struggles with common sense or logical reasoning.

But, but, but —

• Some context: our brains have about 80-100 billion neurons and about 100 trillion synapses.

• ChatGPT and many current tools run on GPT-3 or GPT-3.5 — Large Language Models trained on 175 billion parameters. These parameters help them predict the next word in a sequence of words.

• Rumours are swirling about the impending arrival of GPT-4, pretrained on 100 trillion parameters. Yes, that number is as big as it sounds. More parameters lead to better predictions. Kinda like what our brains do.

With VALL-E, you can clone your own voice in seconds, and Midjourney can generate hyper-realistic images and creative artwork from just a simple text prompt.

But the real kicker is companies like DoNotPay (positioned as the world’s first Robot Lawyer) that are building AI systems that can represent you in court. Imagine having an AI that can listen to proceedings and tell you how to argue your case. It's truly mind-boggling.

The true power of these AI systems seem to depend on your ability to clearly convey your intentions using well-defined prompts. Anything short of that leads to good ol’ maxim, garbage in, garbage out.

Go deeper:

• OpenAI: learn more about the team whose goal is “to advance digital intelligence in the way that is most likely to benefit humanity as a whole”

• Towards GPT-4: are there any limits to large neural networks?

Looking ahead

And the best part? We're still in the very early stages of these technologies. Can you imagine what the future holds? (Assuming the compute side can keep up with the demand).

Despite all this, I still believe that AI won't replace humans entirely.

We'll probably anthropomorphise some of these tools and call them "Digital Workers" an keep going. Or as IBM puts it:

In the past, the term “digital worker” described a human employee with digital skills, but more recently, the market has defined it as a category of software robots, which are trained to perform specific tasks or processes in partnership with their human colleagues. More specifically, Forrester offers the following definition for digital worker automation: It is “a combination of [intelligent automation] IA building blocks, such as conversational intelligence and [robotic process automation] RPA, that work alongside employees. They understand human intent, respond to questions, and take action on the human's behalf, leaving humans with control, authority, and an enhanced experience.”

Looking further ahead

Instead, humans using AI will replace other humans.

Which means, by 2030, small teams of 2-4 highly motivated individuals will be able to leverage AI to build billion-dollar companies. The wealth inequality that will ensue is a topic for another day, but it's something that we need to start thinking about.

For now, one thing is for sure, someone somewhere will use ChatGPT to write a eulogy for someone they love by year’s end. And that’s okay.

💭 Final thoughts

All human inventions are akin to double-edged swords. As such, the good, the bad, and the ugly all coexist within them. AI is no different.

Share your thoughts by replying to this post.

Today I’d like to talk about a clever use of language I stumbled upon early this year: Friend-shoring.

Here’s why.

One of the key ingredients of a great campaign is language. That is, using visual words to create mental images or describe complex concepts. So they are easy to grasp, digest, and share.

What does this look like in the wild?

In 2000 British Petroleum hired Ogilvy and Mathers to help craft and shape what was perhaps one of the most powerful campaigns of recent times. And so the term carbon footprint was coined and popularised—partly by connecting it to personal virtue.

But that’s an essay for a different day.

Now, friend-shoring is not an entirely new concept.

Previous language has been used to describe “restoring resilient supply chains”—but this barely caught the media’s attention. Let alone the general public’s. Too abstract. Too out of reach.

Until early this year.

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So what is friend-shoring?

It’s starts and ends with supply chains.

The unrestricted movement of goods and services is the heart of a healthy supply chain. However, when the flow of physical (or digital) products is restricted, it leads to shocks and many forms of economic havoc—

• temporarily in some cases e.g. empty supermarket shelves due to panic buying.

• or permanently in others e.g. endless sanctions that further choke business activity.

It’s no secret the pandemic exposed how fragile the supply and transport of essential goods and services is in most nations. This fragility led to panic buying that added strain on already weak supply chains. Today, that strain is further complicated by other factors such as the Russo-Ukraine war, extreme weather (e.g. floods, drought, bushfires), and increased demand following the lockdowns.

It’s a whirlwind.

Add to that list an ongoing economic war that is ushering in a balkanised world economy.

As we’ve seen over the last few months, nations no longer need to engage in a military war. Instead, they can weaponise economic levers such as access to currency or energy resources.

• Of note: as we switch to an electrified world, energy concerns will rise even further. As of 2021, China refined 60% of the world’s lithium and 80% of the world’s cobalt. Both minerals are core inputs for high capacity batteries used in electric vehicles and home batteries.

The complex web of interconnected networks that made the global economy run efficiently gave us timely deliveries from countries on the other side of the world. Which meant that before the pandemic—

Everyone everywhere could trade with anyone anywhere.

Here’s an example closer to home:

In 2016-2017, Australia spent about $272 billion (about 16% of gross national income) importing close to 6,000 different products—from over 200 regions. Sitting at the top of these imports were: cars and car parts, specialised equipment, fuel, pharmaceuticals, and chemicals. And while the products were sourced from over 200 locations, the main suppliers were China, U.S. Japan, Thailand, and Germany.

The case is likely similar for other countries. They might import food from the Russia-Ukraine wheat belt, electronics from China, or pharmaceuticals from Germany. The environment of everyone everywhere trading with anyone anywhere brought efficiency with it. And insane wealth.

Everyone could be friends.

It meant you could focus on producing what is most profitable; then use your earnings to buy what you don’t or can’t make locally.

But—

This efficiency came with fragility baked into it. Unrest in a distant country could disrupt the availability or pricing of obscure products in your local neighbourhood.

So now, nations and business have three questions to ponder:

1. Which resources are critical to our well-being?

2. Who can we rely on to supply the resources that we can’t produce locally?

3. How resilient is our distribution/transportation network?

To answer these questions, some political leaders have floated friend-shoring as the likely remedy.

The ultimate goal is to create resilient supply chains that are immune to shocks, or can bounce back quickly from disruptions.

How?

By trading primarily with friendly countries who share your values or interests and by strengthening production at home. Hence—

Friend-shoring is “deciding to make strategically important goods at home or sourcing them from allies”.

Say for example: Europe buys gas and rare earths from the U.S., then supplies Australia and Canada with semiconductor chips—while simultaneously reducing the amount of stuff bought from Russia or China.

The big picture

Again, every nation has a different answer to which resources are critical to the well-being of its citizens. Let’s look at two publicly available examples:

• Australia’s Productivity Commission, has a report investigating what the critical products are in this July 2021 report. That is, products that are vulnerable to disruptions and if absent, would endanger the economy, national security, and Australian’s well-being (e.g. human medicine, and chemicals inputs for water treatment).

• The U.S. answers this question through the lens of national security, economic security, and technological leadership. This June 2021 White House Report (shown below) calls for the U.S. to deepen its economic ties with friendly, “like-minded” countries—months before the Russo-Ukraine war broke:

Most nations place a premium on internal social and economic stability.

So I presume each nation will have a variation of this framework—depending on the imperatives and challenges they find most pressing.

Once a nation identifies the critical resources it needs, it will move to step two. Check the geopolitical thermometer and align itself with friendly nations. And end risky or unpredictable relationships.

Does friend-shoring really matter?

I think so.

Friend-shoring policies will affect businesses—and in turn the economy.

We’ve seen companies like Yahoo, LinkedIn, and Epic Games (the team behind the viral game Fortnite) stating that they plan to either exit or reduce their presence in China.

When faced with choosing between uncertainty and fines or complying to policies, most business will choose the latter. The financial and political risks are too expensive to bear.

• An obvious example would the French cement company that recently got slapped with a US$778 million fine for its payments to ISIS during its operations in Syria.

I’d also like to point out a policy oriented example: the evolution of how NATO sees it’s sphere of influence.

• In 1999, the NATO’s Strategic Concept was optimistic: “NATO and Russia have agreed to give concrete substance to their shared commitment to build a stable, peaceful and undivided Europe. A strong, stable and enduring partnership between NATO and Russia is essential to achieve lasting stability in the Euro-Atlantic area.….”

• Fast forward to 2022, NATO’s Strategic Concept is a lot more precautious: “The deepening strategic partnership between the People’s Republic of China and the Russian Federation and their mutually reinforcing attempts to undercut the rules-based international order run counter to our values and interests.”

I believe swings like this will form part of the new normal—and provide the extra fuel needed to accelerate friend-shoring and reshoring.

Some friends will reunite, others will part ways.

At least until the fog settles.

On the flip side

Now, let’s pause and look at the counterpoints to friend-shoring.

Samanth Subramania from Quartz argues that while friend-shoring sounds good in theory, it might falter due to practical considerations:

• Friend-shoring has financial downsides—the global economy stands to shrink by about 5% (or approximately US$4 trillion), as per a World Trade Organisation Study.

• Friend-shoring will harm poorer countries—particularly those that get isolated or left out by design or otherwise.

• Friend-shoring is easier said than done—to make the iPhone, Apple buys components from 43 countries (re-configuring these supply chains will be a costly uphill task).

• Friend-shoring will increase prices—companies originally offshored the making of goods to countries with cheaper labour or production costs. Exiting these countries will inevitably increase prices.

Zooming in

At this point, I think it’s safe to say much of the rhetoric around friend-shoring has been aimed at China (and Russia to a lesser extent). A trend that began in 2007.

As ongoing trade trade-offs intensify, we can connect the dots and look for the implications of a U.S.-China decoupling.

China has dominated the manufacturing space for the last few decades and friend-shoring’s goal is to reverse this. If followed through, the parting will create echoes throughout the globe.

So who benefits?

To answer this, there are three things to consider:

First, what products can we make?

Let’s look at the critical industries that come to mind when picking your friends or deciding what to make at home. We can refer to UNIDO’s classification which offers a three tier taxonomy.

1. Low technology. Resource heavy industries. Think food products, textiles, clothes, wood and wood products, petroleum, furniture. Nations with large populations and low cost of labour are likely to benefit.

2. Medium technology. Industries that have some value add. Think plastic and rubber products, basic metals, boats and ships, installation and repair of machinery, non-metallic minerals, and manufacturing (except medical/dental instruments). Medium income and some emerging nations stand the most to gain.

3. High technology. Industries with higher R&D intensity. Think cars, advanced manufacturing, computers and electronics, weapons and ammunitions, semiconductors, medical instruments, heavy machinery, pharmaceuticals, chemicals and chemical products. This is a tier China currently excels in—as highlighted by Apple’s CEO Tim Cook back in 2017. High income countries stand to gain the most here.

As nations look to reduce their reliance on non-allies, they will seek to bring the making and sourcing of critical resources back home. And where this is not possible, find new friends they can rely on.

Second, who can we befriend?

When it comes to working out who to befriend, RaboResearch from Rabobank provides a handy framework. Choosing who to part or reunite with will be based on:

• Geopolitics (is the country a friend of Russia/China/U.S.?)

• Domestic political stability (is it safe?)

• The level of infrastructure, which encompasses some landlocked countries (does it suffice?)

• Its labour potential (is the country too small, or unable to offer spare workers?)

• Its cost of labour in the three different product sectors: low, medium, and high technology.

Some nations might also choose to wait and see who wins before over committing to one side or the other.

Third, what are the current trends?

Let’s look at a few examples of friend-shoring currently motion:

• Australia. Canberra intends to spend over $1 billion to win friends and influence nations in southeast Asia and the Pacific region. And support infrastructure has been laid out to promote local growth in medium and high technology sectors.

• U.S. Since 2017, the U.S. government has (through programs such as Prosper Africa) sought to foster friendships across Africa—investing or facilitating close to US$50 billion in deals across 45 African countries. With companies ranging from Universal Music Group, Netflix, Y Combinator, Microsoft, Goldman Sachs and many more investing in array of ventures within the Continent.

• India. The south Asian country looks inward. India intends to expand into the high technology space by investing US$30 billion to shore up its semiconductor industry. This move is estimated to generate around US$110 billion by 2030 if rolled out successfully.

• Turkey. Ankara has been deepening its ties with Africa. Libya is now classified as a “friend and ally”—security guarantees for Libya and hydrocarbons deals for Turkey.

• Germany. Friends reuniting? Berlin facing eastwards?

In short, nations that re-position themselves stand to win bigly. Either in economics, military, or culture. Others will take advantage of the current disorder to secure their best interests.

In their words

Here’s what others are saying:

• “Australia drank the free-trade juice and decided that off-shoring was OK. Well, that era is gone … We’ve got to now realise we’ve got to really look at onshoring key capabilities.” Andrew Liveris, former special adviser to the National COVID-19 Commission

• “Favoring the friend-shoring of supply chains to a large number of trusted countries, so we can continue to securely extend market access, will lower the risks to our economy as well as to our trusted trade partners. We should also consider building a network of plurilateral trade arrangements to incorporate elements of the modern economy that are growing in economic importance, especially digital services. We should harmonize our approaches to protecting the privacy of data. And a modernized trade system will also require the ability to effectively enforce trade policies and practices, both multilateral and bilateral.” Janet Yellen—US Secretary of the Treasury addressing the Atlantic Council.

• “A resilient supply chain is one that recovers quickly from an unexpected event. Our private sector and public policy approach to domestic production, which for years, prioritized efficiency and low costs over security, sustainability and resilience, has resulted in the supply chain risks identified in this report. That approach has also undermined the prosperity and health of American workers and the ability to manage natural resources domestically and globally.” 2021 White House Report

Want to go deeper?

• 2020: Newsweek calls it “ally shoring”

• 2021: White House Report

• 2022: Janet Yellen’s speech calls for friend-shoring

• 2022: RaboResearch dissects the topic

• 2022: China’s strengths

Final thoughts…

To say we are wading through uncertain times is an understatement. Supply chain maps are getting redrawn and the globalisation has slowed down.

I think friend-shoring is hardly friendly or about traditional friendships. But it is emerging as the primary state of play in the global economy.

At a human level, I believe you’ll find fear and the desire for self-preservation underneath all this. Fear of unpredictable neighbours. And the uncertainty arising from growing tensions within and between nations.

This fear is partly understandable.

From a birds eye view, it may seem that the international rule of law is receding. A stronger actor may march in and take what they want from you. Or another may arm-twist you into submission by leveraging your dependence on their infrastructure or resources.

This is true whether you are friends or not.

As we’ve seen in recent months, nations can opt to abruptly restrict food, tech, or energy exports to secure supply for their locals.

Friend-shoring is therefore a logical response to these concerns.

Moving forward, I think self-sufficiency will be preached as the only true antidote. It will likely be clothed as economic or national protectionism. But it is an uphill task to be self-sufficient (thanks to the constraints of geography).

Resilience, or the ability to bounce back quickly from shocks, should—I believe—be the priority in unsteady times.

So what next?

The most prudent act is to identify which critical resources you need—resources that if absent will affect your well-being or stability.

Onshore what you can, and build reserves for what you cannot.

For example, as a nation, you could assess whether you’re a net exporter or importer of food. If you’re a net importer of food (or fertiliser) this poses a glaring risk for food security. This could easily lead to social and political unrest.

The same goes for net energy importers. So your focus should be to secure food or energy from other sources or build internal reserves from your current suppliers.

Though it emerged as a concept in 2020, friend-shoring only began picking up speed in 2022.

There are deeper reasons for why it’s happening now (something I’ll cover in future writings). But I think friend-shoring is a large part of what the world might look like in 2040. And in addition, new fruitful opportunities will arise for those clever enough to spot and embrace them.

Unlike the golden age of globalisation—where everyone everywhere traded with anyone anywhere; the future will likely consist of clusters of countries trading with each other. And we’re yet to see whether this will limit market sizes available to business.

However—

The future is unknowable. There is always the possibility that we might experience a u-turn and revert back to increased globalisation and relentless growth.

But I personally think it’s unlikely and we should prepare—unless the metaverse takes off.

When history licked its finger and turned to page 2022, most of us (Victorians) hoped that it wouldn’t be another 2020 too. And this hope manifested into reality. At least in part.

We went from sweating and shaking from Coronavirus, to sweating and shaking from what some now call “car owner virus”. We went from fretting over vaccinations to fretting over vacillation.

Now as we edge closer to the end of the year, I think it is apparent that this year is more akin to 1991 than to 2020. In the sense that this year—punctuated with scattered events—has brought with it many changes. The kind of changes that feel like a dense fog filled with 2nd and 3rd order effects. Effects that are difficult to visualise—not because they are hidden, but because they are right in front of us.

These events—both tiny and huge—might seem disconnected on the surface but tell a deeper story of where the world is heading when you zoom out.

1991 ushered in a new world. A prosperous world. But that world buckled in 2008 and has been limping to recovery since then. And now 2022 (just like 91 before it) is ushering in a new world too.

Hear me out.

• The structural weakness of the EU is starting to show.

• The third and fourth largest economies are (re)awakening their militaries.

• Tensions and conflicts within and between nations are on the rise.

• The pandemic and its solutions have caused distortions in the economy that will linger for years to come.

• More money is flowing into defence. 

• A bifurcated world is emerging—in finance and the internet.

• Population pyramids are morphing into population mushrooms as the world ages (2019 was the first year where there were more humans aged 65+ than 5 and under).

• And perhaps most importantly, populism is on the up.

The storm clouds have gathered. If you squint, you can see the three great challenges this decade will have to wrestle. Before a more localised world starts to bloom once again in the 2030s. And there will be bountiful harvests from new opportunities that will blossom over the next 8 years.

Like many others, I think we are living through history. I’ll wager this—when future historians look back at the 2020s, they will probably call it: the Age of Rage.