What Does the Future Hold for Taiwan and Semiconductors?

Taiwan has positioned itself as the dominant player in the semiconductor industry, but what would happen if a conflict with China broke out? Well, if semiconductor supply chain vulnerabilities are top of mind, than sure, this should be of concern (but you should also be worried about the thousands of companies and locations that are nowhere near Taiwan that make up the vast bulk of the supply chain).

Let’s move past those concerns for today and break down what Taiwan and companies like TSMC (Taiwan Semiconductor Manufacturing Company Limited) have planned for the future. We’ve seen Taiwan “cooperating” with the US and Japan in recent years, but what’s going on?

The Trump administration demanded that TSMC build the best facility they possibly could in the United States, and it is…not happening. Taiwan’s efforts in the US are little more than a kabuki effort to appease the US and maintain its favor. In contrast, new fabs in Japan are moving along swimmingly, as the Japanese didn’t insist upon the cutting-edge technology that the US wanted.

While the US has companies like Intel trying to replicate (and surpass) the advanced semiconductor technology of Taiwan, progress is difficult and I wouldn’t expect anything to come of it soon in the next year or two. Taiwan understands perfectly the situation that it is in and is playing its cards very strategically.

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Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

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Transcript

Hey, everybody. Peter Zeihan here, coming to you from the southern rim of Upper Lyle Canyon in Yosemite. Last time I was here, I hiked all the way up that. Whoo! That was exhausting. We’re just going to look at it from a distance this time. Anyway, today we’re gonna take another entry from the Ask Peter forum.

It’s about Taiwan and semiconductors. And the question is, why would Taiwan help relocate any facilities to the United States? Isn’t that kind of their guarantee that the United States will come to defend them if there’s a conflict with China? The short version is: not really. Two things going on here.

Number one, never, ever, ever, ever, ever forget that the semiconductor supply chain involves over 9,000 companies, half of which only produce one product for one end user. So, Taiwan isn’t necessarily a strong point in the international supply chain for semiconductors, but there are literally thousands of others. All these companies make products that ultimately end up in TSMC’s hands, which they use to build and operate the fabrication facilities, and, of course, fabricate the wafers and the semiconductors themselves. So you can have any number—literally thousands—of problems around the world that shut this whole thing down.

And while Taiwan is certainly a node that is the single most important one, it’s hardly the only one. The lasers come from California. The lenses come from Germany. The designs typically come from the United States. The silicon itself comes from North Carolina. It is diversified in that it’s everywhere, but it is not diversified in the fact that there are any backup plans.

So, if there was a war in Taiwan, I’m not suggesting the United States would or wouldn’t get involved. I’m saying it wouldn’t matter, because if we’re at that point, then the elements of the supply chain that are elsewhere in East Asia go offline. So, intervening in that war doesn’t solve this particular problem. The second issue is that Taiwan is not stupid.

Taiwan is building fabrication facilities in the United States in order to please the United States. But, as with everyone who cut a deal with Donald Trump, they kind of pulled the wool over his eyes. They basically flattered him and said, yes, we’ll build a semiconductor fabrication facility in Phoenix. It’ll build sub-three nanometer chips, which were, at the time, the best in the world.

What they neglected to say is they weren’t going to provide blueprints. And so, that facility has now been under construction for a few years. It’s making no progress. In fact, they’ve had to tear down many of the facilities and rebuild them from scratch because the Taiwanese are flat-out stalling. Similar things happened in a number of things that had to do with economic deals.

For example, supposedly TSMC was going to build a facility in Wisconsin. That came to nothing.

If the United States is going to establish an alternative supply to Taiwan, it obviously has to build the fabrication facilities. And the leading candidate for that right now is Intel. Intel is absorbing some new technology from the Dutch lithography company ASML, which is actually more advanced than what the Taiwanese are using.

They’re hoping, hoping, hoping, hoping to have that online in Columbus, Ohio, within a couple of years. And if, if, if, if, if that works, we’re talking about Intel not simply being able to match the technological level of TSMC, but maybe leapfrogging it a little bit. Best-case scenario, we are not going to see the first wafers out of that facility for two years.

I think four is probably a little bit more realistic. And those won’t be the one-nanometer chips that Intel has started discussing, although the new technology does look very promising. It’s just that these things take a long time to set up—years. And while Intel has made some great progress, their track record for doing things ahead of schedule is almost nonexistent.

I have no doubt they’ll get there, but they’re not going to get there this year, or next year, or probably the year after.

The alternative for TSMC is to also ingratiate themselves with other partners. After the United States, the single most important one is, by far, Japan. And they have started building fabrication facilities in Japan that are ahead of schedule, unlike the Phoenix facility, because Japan didn’t ask for the cutting-edge stuff. They just asked for stuff that would help with their automotive industry.

So, you’re talking about chips that are poorer quality than 10 nanometers, which is kind of a threshold for the really, really good stuff. So, that facility doesn’t threaten TSMC’s business model. It allows them to solidify their strategic alliance with Japan. And Japan, of course, has the second most powerful navy in the world. So, if there is a Taiwan war, Japan will probably actually be there before the United States.

So, sound decision-making from the Taiwanese on both deals: with the United States, which they are reneging on, and with the Japanese, which they are not. The end.

The Self-Inflicted Downfall of Mexican Energy

Following its discovery in the 70s, the Cantarell oil field enabled Mexico to become a major oil producer. Decades of lax management and complacency by Pemex, Mexico’s state-owned oil company, together with the declining output of the Cantarell, has left the country with serious production problems.

President López Obrador has attempted to revive Mexico’s energy sector with heavy investments into refineries like the one in Tabasco. Unfortunately, Pemex’s inefficiency led to budget issues which delayed the project even further. It could be too little, too late for the Mexican energy sector.

To add insult to injury, Mexico’s preexisting refineries were designed to process Mexico’s own heavy, sour crude, not the light, sweet stuff coming from the US. So, even if the US wanted to send some crude Mexico’s way, it would be futile. If Mexico continues down this path, they’ll be forced to import refined US oil or rely on unstable regions for crude that matches their refineries’ needs. Either way, this dependency would cause major economic and political challenges.

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First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Transcript

Hey, everybody. Peter Zeihan here, coming to you from lower Ottaway Lake in southern Yosemite. And today, we’re gonna talk about Mexican energy. The story begins over a century ago, when there was a discovery called the Cantrell field offshore Mexico. And the Cantrell is unique among oil fields. It’s basically shaped like a volcano, with the tip at the very top and the pressure pushing all the oil towards the tip.

So, basically, they were able to put just a handful of offshore production platforms above that tip. You can see all the platforms from one another, and the pressure just continued to flow and flow and launch, flow and flow. It made Mexico a major oil producer and a significant exporter and supplier to the United States. However, one of the threads in Mexican politics is a degree of anti-Americanism, largely because the United States is the closest to the North, and it can get a little bit bossy.

So, the Mexicans actually put into their constitution that no energy asset could be operated or owned by a foreign entity. So Pemex, which is a state oil company in Mexico, was in charge of everything. Well, when you exist in that sort of controlled environment, you tend to get a little sloppy, especially when the oil comes easy. So, decades turn into decades turn into decades, and eventually, the Cantrell starts to give out.

Pemex never really bothered to learn how to explore or produce more difficult fields. And so, for the last 30 years, we’ve seen Cantrell basically fall to almost nothing, and Mexican oil production fall with it. While this is going on, Mexico is rapidly industrializing because of NAFTA, so its fuel needs have gone up. They finally loosened up some of the restrictions a little bit and allowed the import of refined products so that, you know, cars could run. Mexico is now the single largest consumer of American-exported fuels, courtesy of the shale revolution.

Well, in comes the president, Lopez Obrador, who is more anti-American than most Mexican politicians and decided that this was a bad idea. So he started splurging money on a refinery in his home state of Tabasco to make it so that Mexico wouldn’t have to import refined product. Pemex, being as incompetent as it is, saw the project go hugely over budget.

It’s operational now. But here’s the problem: Pemex can really only focus on one thing at a time, and they don’t really do the one thing all that well. So yes, they now have the refinery starting up, but oil production is tanking to the point that, very, very soon—probably within 2 or 3 years—it’s going to fall below the level that Mexico needs to supply its own needs.

So yes, they can refine, but they can’t produce the crude. The problem is, this isn’t something where they can just turn to American fuels. The new problem is American oil is primarily light and sweet, coming from the shale fields. Basically, shale fields are kind of like concrete, and there are little pockets of petroleum trapped in between the individual particles of the rock.

That’s why you have to frack it. You basically spider up the entire thing with cracks, and then the stuff can get out. The Cantrell field and most Mexican fields are much more traditional in comparison, so the oil can migrate through the rock strata. Well, for shale, this means there are fewer contaminants in it, which is the whole light sweet thing. Mexican crude is more heavy and more sour.

The Tabasco refinery, along with all of Mexico’s refineries, were designed to run on Mexican crude. So if they end up having to import oil in order to make their own refined product, it’s not going to be U.S. shale crude. They’d have to completely overhaul the refineries for that. Mexico has now become the one country in the Western Hemisphere that might actually be dependent upon oil politics of the Eastern Hemisphere. For the United States, which is slowly retooling all of its refineries to run on its own crude, this has become a bit of a headache, but one that can be dealt with, especially since

the United States has the capital to change its refineries to run on its own crude. Mexico doesn’t have that kind of resources, so we’re probably going to be getting to a situation within a decade when Eastern hemispheric energy flows are interrupted. The United States is fine—in fact, is doing great—but Mexico is either going to have to shut down its own refineries and then bring in American refined product again, or be subject to a crazy price environment that is subject to things like Russian shutdowns and more wars in the Middle East.

Mexico has, unfortunately, found a way to make itself far more exposed than it needs to be because of nationalism. How they deal with that? Well, only time will tell.

Will the Far-Right Take Over Germany (Again)?

German regional elections in Saxony and Thuringia saw some of the country’s far-right parties, including the Alternative for Germany, perform quite well. Don’t sound the alarm bells yet, but this is yet another reminder of the ongoing economic and political issues in Germany.

While these far-right groups saw some success in these elections, they aren’t likely to form coalitions or gain significant power. The current government, a coalition between Social Democrats, Greens and Free Democrats led by Olaf Scholz, will likely remain in power through the next general elections.

Dissatisfaction amongst the Germans is growing, especially within East Germany, and for good reason. The government struggles to make decisions and can’t get aligned on anything; combine that with all the other issues facing Germany and we can expect some eventful elections come September of 2025.

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Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Transcript

Hey, everybody. Peter Zeihan here. Coming to you from Germany. I’m not in Germany. I’m in Colorado. We’re going to talk about Germany. Jeez. Sorry. I didn’t get a lot of sleep last night. Let’s see, where were we? We’re in around the turn of August. In September, the Germans had regional elections. And in two states, specifically Saxony and Thuringia, which are provinces in the former East Germany.

So, provinces that have not done well these last 30 years. The far right did very well. Two parties, or with call out, the AfD, which is the alternative for Germany. And then literally a splinter party ran by a Czech who put her name as the party name with the, you know, ego. I’m not going to bother repeating her name because she’s a flash in the pan.

Anyway, did very well. The largest or second largest parties, and a few people are freaking out, especially in Germany, when the Germans tend to elect people that are basically, you know, less organized Nazis, it’s worth paying attention. I don’t want to belittle this, but I’m not too worried. Number one, no one’s going to work with them to build a coalition, so they’re not going to take over the state governments or the land or governments, if you want to use the technical term.

But it is an indication of two things. Number one, the integration of the former East Germany into the former West Germany, into what we now consider to be the Federal Republic of Germany. It’s been a tough row to hoe. Basically, the former East Germany was the economic success story of the former Soviet Union. But when it was integrated with Germany, which was one of the most advanced economies in the world, every piece of infrastructure they had was absolutely crap.

And they made a decision, for political reasons, to allow anyone in the East Germany to relocate anywhere in Germany right away, which, you know, is kind of important. You needed to do that from a national unity point of view. But it meant that anyone who had talent in the former East Germany picked up and moved to Bonn or Munich or somewhere else, tripled their income overnight and never looked back.

And so the people who stayed were the people who were either very happy with the Soviet socialist system, or the people who were very old and couldn’t move, or the people who were happy not being very ambitious. Well, you fast forward that 40 years and East Germany is basically a bit of a basket case, with the exception of the area around the capital Berlin itself.

You also have the issue where they decided to make one East German mark work with one West German mark, which again, politically important, but that encouraged people in the East to stay put because they could just spend their money, and didn’t have to worry about actually working hard to learn how the West does things. Anyway, you play this forward 40 years, you get a lot of political dissatisfaction, a lot of economic dysfunction.

It’s not that the West Germans didn’t try. They spent over €1 trillion in order to integrate these two parts into one. It just hasn’t worked very well. And now that the German population is literally dying out because of demographic decline, it’s too late. It’s not going to get better. So while I’m not concerned about what this means for German politics at the moment, you fast forward 5 to 15 years, and I get very concerned very, very quickly.

The second issue argues both for stability and future instability. There’s been a lot of talk in Germany, even before these elections, about the failure of the current government of Olaf Schultz. Now, Olaf Schultz is a socialist. Socialist in Germany doesn’t mean the same thing it means in the United States. This isn’t Bernie Sanders. This is someone who can do math.

And he is in a coalition government with the Greens and a group called the Free Democrats, which are kind of a libertarian pro-business group, especially small and medium-sized businesses. And the three factions don’t have a huge amount in common, and having all three of them in one government has made decision-making very, very difficult at the German level and the European level, because whenever something happens at the European level, the Germans have to go home and hammer out a common position.

And the three parties don’t have a lot in common anyway. Two things here. Number one, this government isn’t going away until its full term is up. You can’t have a vote of no confidence in the German system like you can in, say, France or the United Kingdom. In those countries, if the government loses favor, all it takes is a simple majority of the Parliament to basically vote to call new elections.

For that to work in Germany to eject the government, it has to come from the government, which they don’t want to do because they would get trounced in general elections today. Or, other parties have to come together and form a replacement government with the seats as they exist in the Parliament today. So no, no, no, no vote. You just work with what you have to form a new coalition.

And the only way that would work is if the opponents of the socialists, the Christian Democrats, were to form their own coalition with the Greens and the Free Democrats. And that’s not in the cards at the moment either. So we’re stuck with this government for at least another year until we have general elections. What that means is the central government is basically slouching towards Armageddon.

All of the issues that have vexed Germans—economic dislocations, the failure of the postwar model, the Ukraine war, the rise of the far right, immigration—all of these cultural and economic issues that really are big and do need to be discussed won’t be, because the current government is locked into place and can’t fall. So this election cycle, no big deal.

The next one, that’s when things get lively.

Telegram and the Limits of Freedom of Speech on Social Media (Part II)

Today we’re looking at the importance of Telegram. No, we’re not talking about the thing a telegraph sends. We’re talking about the messaging platform created by Pavel Durov that’s causing quite the stir as of late.

Telegram has become the platform of choice for many of the world’s most unsavory characters – think the Russian military and ISIS. Telegram and its founder opted to not cooperate with Western governments and resisted any form of data sharing with authorities. This was the case, until founder Pavel Durov was recently arrested and promptly released in France.

Now, if I was someone who knew I was wanted in a number of countries, I would probably avoid visiting said countries. I would imagine Durov would do the same. So, I suspect that this was all part of some elaborate deal that Durov and the French authorities cut. If that’s the case, there could be some major implications.

Remember how I mentioned that Telegram was the choice platform for unsavory characters. Well, if Western governments can get their hands on these messages, logs and information, that would be a huge intelligence breakthrough that the Russians would love to avoid…

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First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Transcript

Hey, everybody. Peter Zeihan here. It’s tomorrow. I promised that we would talk about telegram and social media regulation in the European space. Well, okay. First, what is telegram? Telegram is basically the Russian equivalent of something like Twitter or Facebook manager. The idea is that you can have a part of your account that is, encrypted due to agree to send messages back and forth that no one else can follow. 

Now, when you have a system like this and you get extremist groups that start posting messages, whether that is a right wing group in the United States or, say, ISIS in the Middle East, governments often lean on institutions like Facebook, like WeChat, and the rest to basically give it up. It’s like, you know, this is an issue of public safety. 

You need to cooperate and share your information with us so we can do normal law enforcement things and prevent terror attacks. Now, all of the platforms in the world cooperate with U.S. authorities on that topic except telegram. Telegram does not participate in any assistance with any Western government whatsoever. And so you can imagine the quality of people who tend to use telegram. 

They’re not the sort of people you’re going to invite to a bar mitzvah. They do, of course, cooperate with Russians, Russian governments in order to keep domestic political opposition in Russia under control. But it was a Russian founded institutions. No big surprise there. Now, the guy who founded this thing, Pavel Durov, left Russia a few years ago because the Russian government was, again, a little bit too hot and heavy with leaning on him personally. 

So he’s operated the place primarily from Dubai, but he also had citizenship in France. Well, the French have been after Dubai for quite some time because remember the type of people who use telegram often are not very savory. So you get a lot of drug runners who use this to send money back and forth. You get a lot of child molesters who use it for child porn. 

So the French have had an open warrant for Pavel Durov for quite some time. And he showed up in France. He’s flew on his personal jet, surrendered to authorities, was arrested on the spot. Now, if you are wanted by someone for trafficking in kiddy porn, you are usually aware that the government is after you. And if you’re someone as wealthy as Durov is billionaire, you’re not going to just accidentally land your plane somewhere where you think you’re going to get arrested. 

So he clearly knew what he was doing going in, and he was released in less than 24 hours on bail. Can’t leave the country. But that suggests to me that a deal was cut between the French and Durov, probably even before he left. And now they’re just working out the fine print of the degree of cooperation. 

Now, a few things to keep in mind about telegram from a technological point of view, it’s nothing special. Facebook and WeChat have significantly better encryption than anything that they have. And so, for example, while telegram has not cooperated with Western institutions, most notably the NSA here in the United States had a field day cracking their encryption to go after ISIS. 

And that’s one of the reasons why, over the last several years, ISIS has done so badly that they thought their encryption, was fool proof. And really, most of their mail is being read. And so if you’re a subversive element anywhere in the United States, Dell mass just keep in mind that the FBI’s probably reading absolutely everything that you put out there. 

Now, back to the telegram. So the question now is, what is the deal? TBD, to be perfectly honest. And I’ve kind of put off doing this video because I, we really wanted to have an answer to that question. But I think the biggest thing to keep in mind is not so much drug runners or child molesters, but it’s the Russian military. 

Because while telegram is hardly a very good platform for security, its lack of difficulty in use has meant that it has become the preferred method of communication for the Russian military within itself. You see, Russian private encryption may not be nearly as well as Western private encryption, but it’s loads better and much more user friendly than Russian government military encryption. 

So the Russians have had a problem in the Ukraine war that when they are doing some spotting for artillery, whoever’s doing the spotting basically has to go into this ancient archaic system to send time into task targets and coordinates and everything. And by the time that information is encrypted, uploaded, del loaded, delivered and then d encrypted, it’s irrelevant. 

And so they’ve just been using telegram to basically text directly to the artillery teams. Well, all that data is on telegram. All of the data for their ship to shore communications, even some air power issues are oh, oh my God, it’s so stupid. Anyway, so if giraffe is really deciding to cut a deal with the French intelligence ministries, well, this isn’t potentially just a breakthrough for enforcement in terms of law enforcement. 

This is potentially an intelligence breakthrough for strategic issues because the Russian military has been using it for almost everything. So we have been seeing Russian military bloggers in a not so small number of Russian government personnel in the foreign and defense ministries, basically losing their crap over the last couple of weeks as they’re trying to figure out what it is the Durov is going to give up publicly. 

Nothing has been said publicly. Telegram is saying this is a free speech issue. We have the right to kitty porn. You can imagine how that well, it’s going over in France. Anyway, we will know before long just how this is going to go because like I said, Taraf is already in France and France. France isn’t like the United States when the French government and especially French Intel personnel want something, they have two ways to do things where they have very little pushback from the civilian authorities. 

Number one, little things like torture in France, if you’re a foreign national, they’re a little bit less chatty about the details. Second, if you’ve ever been to the south of France, it’s beautiful. And there’s lots of villas there that could use an extra Russian billionaire. So whether it Durov is induced to cooperate or is chosen to cooperate, there is a tough road and there is an easy road in front of him. 

And the fact that he went to France willingly suggests that it’s going to be the easy road, and someone is going to be having a great time around me in the not too distant future. And the Russian military is going to lose its primary method of communication, and it’s going to lose all of its archives to French intelligence. 

And the French are very good at using stuff like that. 

Should Freedom of Speech Extend to Social Media? (Part I)

Should people be able to say whatever they hell they want on social media? Brazil doesn’t think so, at least when it comes to public misinformation. While most social media platforms have bent the knee, Musk and Twitter (now X) have held out.

Unlike the US, the Brazilian govenrment enforces laws over public misinformation, which ultimatley led the courts to shut down Twitter within the country. Most social media platforms have complied with these laws, addressing any calls for violence and falsehoods within their feeds.

This is just one example of the differing global approaches in regulating freedom of speech online. Much of Europe is keeping a close eye on Brazil right now to see how this all shakes out, since they have their own issues stacking up…including that pesky app Telegram that the Russians love so much.

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Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Transcript

Hey everybody, Peter Zeihan here, coming to you from Colorado. Today, we’re going to talk about social media, truth, government, Elon Musk, the right to lie, and all that good stuff. The issue of the moment is happening in Brazil, where Elon Musk and Twitter (or X, if you prefer) are in a spat with the legal system, including the government and the Supreme Court in Brazil, over social media postings. The very, very, very short version is that Brazil has laws on the books that prevent you from lying in the public sphere, unlike the United States.

They are trying to enforce those laws against Twitter. Twitter refused, at Musk’s direction, to play ball, so the Brazilian courts shut Twitter down. Elon Musk, being Elon Musk, said, “Well, I’ll just transmit it via Starlink.” So the Brazilian government started the process of shutting Starlink down. Needless to say, once his bluff was called, Musk backed down. The court cases are continuing. Musk has called his friends at the FCC (the Federal Communications Commission here in the United States) to work that angle against the Brazilian government, and that is in play as well. It’s a lot of back and forth, but let’s start with the basics.

This isn’t unique to Twitter. There are numerous social media platforms operating in Brazil. The issues the Brazilian government is concerned with involve calls for the overthrow of the government, outright lies, and calls for violence in schools. Every other media institution in Brazil complied with the government’s orders to take this stuff down.

What Elon Musk is really talking about when he mentions extreme rights to free speech is the ability to say whatever you want, whenever you want, regardless of the consequences. Social media is new, and so is its regulation. Every time the United States has gotten new technology for information transfer, we’ve had to build a legal structure to manage and regulate it.

If you go back to the 1800s, every political party in the United States had its own newspaper. If you think MSNBC and Fox are bad now, it’s nothing compared to what we used to put into print, with everyone just making things up about everybody else. Eventually, that got tamped down, and you had to, you know, tell the truth to some degree.

Then we got the telegraph. Suddenly, you didn’t have to wait for the morning edition—people could just type things out and send them across the country. Once again, lies, lies, lies. We got something called “yellow journalism,” which was partly why the United States got involved in the Spanish-American War.

To move from a wild west of information sharing and fabrication to something more civilized, you need some level of agreement among various factions of society. During Reconstruction and the Roaring ’20s, the United States didn’t have that. But with World War II and the dawn of the Cold War in the 1950s, we got a series of Supreme Court cases and Congressional laws that built the structure of libel and fraud laws we know today.

What we’re struggling with now in the United States is that we have those fraud and libel laws that regulate television, newspapers, and magazines, but they don’t regulate social media. Social media comes under the 1996 Telecommunications Act, which says if you’re a technology platform provider, you’re not legally liable for what anyone posts on it.

We don’t have laws regulating what people post, so anyone can say whatever they want, and it can stay up for as long as they want. If someone regulates it, they’re doing it out of goodwill or because the government said, “Hey, this could kill people.”

The quintessential topic of the day is Donald Trump insisting that the 2020 election was stolen from him. After four years, Donald Trump and the Republican National Committee have yet to produce any evidence that the election was stolen. It’s not that evidence has been presented and found faulty; nothing has been produced at all. If you don’t believe me, go to Chris Krebs. He was in charge of maintaining election integrity under the Trump administration, and he said the 2020 elections were the cleanest in American history. Trump fired him.

Saying the election was stolen is still illegal in the United States. Repeating it as news is still legal because we haven’t built the legal structure to regulate it. At this moment in our country’s history, we’re debating a few things, so the consensus needed for new speech regulations probably won’t happen soon. That moment, however, has come and gone in Brazil.

Brazil had a military dictatorship in the latter half of the last century. Once civilian rule was reestablished, they got a new constitution, a new currency, and peaceful transfers of government. They concluded that outright lies in political discourse were bad for their society, so they regulate them.

The danger, of course, when regulating free speech is that someone must act as the arbiter of truth. Someone has to determine, on a case-by-case basis, what is factually correct and what is a flat-out lie. In Brazil’s case, since the recent issues involve calls for sedition, coups, and murder in schools, it hasn’t been hard for Brazilians to get behind this. These aren’t gray areas in the free speech debate, but you still need an arbiter of truth.

The judge involved in this case has been on the job since the “carwash scandal” years ago, where multiple Brazilian governments have tried to clean up public affairs. While it may be too strong to call this a bipartisan or multiparty effort, it does enjoy support across Brazilian society. Musk maligned this judge personally, but the ruling was appealed, the Supreme Court got involved, and it was a unanimous decision. The executive branch of the Brazilian government supports it too.

It’s hard to see the Brazilians backing down on this. Brazil is an important country in South America. What matters here is that many other countries are struggling with this topic for the same reasons. The European Union is paying close attention to what happens in Brazil because they’ve already built a digital directive. This directive gives the European Commission (their executive branch) the legal authority to create an arbiter of truth, manage social media, punish bad actors, and handle content moderation. They haven’t built that arbiter yet, but they’re watching Brazil to see what works.

It’s probably not going to be Musk and Twitter that decide this case. The first case for whatever this new authority will be is likely to involve a different platform—something called Telegram, which originates from Russia. And we’ll talk about that tomorrow.

The Geopolitics of Wine

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Today’s video is fueled by Scott Base Vineyard in Cromwell, New Zealand. After all of the time I’ve spent in New Zealand, this is far and away my favorite winery.

Wine is a top 20 internationally traded commodity by value, so it definitely has some geopolitical backbone to dissect.

The main distinctions in the world of wine come from vineyards being irrigated vs. not. Irrigated growth is relatively new in the world of wine, so Old World vineyards have to compete in new ways, mainly by moving up the value chain in the cellaring process.

Aging demographics are also disrupting the wine industry since capital becomes more expensive as older populations begin sucking money from the system. Wine is highly capital-intensive, especially when a decent yield takes several years after putting vines in the ground.

So countries with access to capital and/or young demographics have a leg up on the world of wine. The Kiwis and Aussies will be all right. Argentina is probably going to hurt. And most of Europe’s wine complex will struggle here soon…except the big dog, France.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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China Will Soon Lose the Title of “World’s Manufacturer”

Globalization led to the rise of China as a manufacturing powerhouse, since finding the lowest cost producer was the priority. However, deglobalization, coupled with China’s demographic decline and aging workforce, has both eroded that competitive advantage and changed everyone’s priorities about cost. So, what happens next?

With China fading from the spotlight, Western countries will become more protectionist, which means manufacturing will be coming back home to places like the US and Europe. But that’s going to bring a while slew of problems with it.

While this transition will create significant job growth and increase the political power of labor, it will also bring high inflation and inefficiencies. This will force highly skilled workers to take on tasks that were historically outsourced to cheaper labor markets. So, if you thought inflation was bad now, just wait…

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Transcript

Hey everyone. Peter Zeihan here coming to you from Yosemite. This is an unnamed lake behind me, so I’m going to claim it. This is Peter Lake and there’s Peter Island right in the middle of it. Great for laps. I built a summer home here. Any who? I wanted to talk a little bit today about the global structure of employment.

Looking forward and back, if you could sum up the concept of globalization into a single phrase, it would be lowest cost producer. The idea is, whoever can produce the product or the step in the supply chain at the lowest cost in a reliable manner pretty much gets the business. And when the Chinese built it up to the bar in the 1980s, they brought a billion industrial workers with them.

And that’s before you consider the fact that it’s a single legal structure, such as it is, or that they subsidize the bejesus out of everything to drive any competition out of business. Basically, they took all the assembly and the low-end stuff from the rest of the developing world, where no region was probably suffering more than Latin America.

Where the geography is much more difficult for infrastructure. And so the Chinese could outcompete them there as well. For the first world countries, and most notably, the United States, we got out of that sort of business because if you pay an American $50,000 a year to assemble a car, it’s going to be a really expensive car.

And so we doubled, tripled, quadrupled down on design work. And there are few industries where this shows up more than technology. The Chinese may make some low-end semiconductors and do a lot of assembly, but it’s the Americans who design most of the chips and make a lot of the high-end chemicals that are necessary for Chinese fabrication facilities to work.

So when someone tells you that the Taiwanese or the Chinese or the Koreans or the Japanese stole our industry in semiconductors, you know, no, we still do the high-value added stuff. The Chinese do the low-value added stuff. Anyway, this has been the state of affairs in increasing intensity for the last 30 to 40 years.

And now we’re entering a new world where the Chinese are aging out. And so they’re losing their economic competitiveness, even at the low end. And their workforce is collapsing because their population is in demographic decline, actually, demographic decline is too kind—demographic collapse. They now have more people aged 60 to 75 than 0 to 25, if I remember my math correctly. Anyway, it’s close.

Sorry, I can’t fact-check out here anyway. Lots of old people, very, very few young people, and even fewer people coming into the workforce in the future.

Okay, so what happens now? Well, the Chinese are no longer competitive. It’s only because of the sunk cost of the industrial plant that we still think of China as an industrial power.

And, you know, 30-odd trillion dollars in sunk cost in industrial plant. That’s not nothing, but it’s not enough without a workforce.

That’s before you consider the trade wars that are intensifying, regardless of who wins the American presidential election, regardless of who wins in various European elections. Both the American and the European blocs have turned very sharply protectionist, specifically versus China, and so we’re probably going to see significant crunches in the trade portfolio of products coming from China very, very soon.

What we’ve seen with the electric vehicles is really only the beginning. What that means is if the Europeans, and especially the Americans, still want stuff, they’re going to have to make it their damn selves. And there is the problem, because the United States has geared its educational system, its infrastructure, and its capital structure over the last 30 years to do more and more higher and higher value-added work, not a lot of assembly.

And so we’re going to have to take highly paid, highly skilled American workers and put them to work doing things that, under normal circumstances, they’d have people in another country do. Now, this will generate a lot of employment. This will generate a lot of political power for labor, organized or otherwise. But it comes at a cost, because if you’re going to pick one word to sum up globalization, it was efficiency.

And there is nothing about having people do jobs that they weren’t trained for, or that they’re overqualified for, that’s efficient. So yes, we will get huge growth, and yes, we will get huge inflation to go along with it. The 2, 3, 4, 5, 6, 7% that people have been bitching about these last 3 or 4 years, that’s just the start.

Deglobalization’s Impact on Global Food Exports

Image depicting global grain and coffee sacks for export

Globalization has allowed us (meaning humans as a species) to make some of the worst lands farmable, inhabitable, and even prosperous. But what happens to global food exports when globalization ends?

There are five requirements to sustain successful agricultural exports in a deglobalized world: productive arable land, petroleum for fuel, and three essential fertilizers (potash, phosphate, and nitrogen). If a country doesn’t have access to one these, they might be SOL.

North America is the big winner here, specifically the US and Canada which have almost everything right at hand. Other regions that top the list are Argentina, New Zealand, Australia and South Africa, although these countries may struggle with fuel supplies. Brazilian agriculture will suffer due to poor land quality and heavy reliance on fertilizers coming from China and the former Soviet Union (which are likely to destabilize). Any of those specialty crop producers, especially those in the California’s Central Valley, will likely have to pivot business models due to shrinking markets, high costs, and dependency on Chinese markets.

Deglobalization could cause a potential drop in calorie production by a third and the fallout would be devastating. We’re talking widespread food shortages and catastrophic levels of starvation.

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Transcript

Hey everybody, Peter Zeihan here, coming to you from central Yosemite. I’m standing by another mountain lake, which, being unnamed, is now officially called Peter’s Other Lake! And it even has a beach—pretty cool, right?

Anyway, today we’re diving into another question from the Ask Peter forum: what’s going to happen to global agricultural exports in a post-globalized world? Short answer—nothing good.

To sustain agricultural exports, you need five key things:

  1. Arable Land: You’ve got to have a lot of productive land.

  2. Petroleum: Agriculture on a large scale relies heavily on internal combustion engines. There’s talk of electric tractors, but the technology isn’t there yet. Their charge doesn’t last long enough, and they don’t have the power to do meaningful work. So, unless you’re talking about a small electric cart for something like apple picking, we won’t see electric solutions this decade, probably not even next.

  3. Fertilizer: Fertilizer comes in three parts—potash (potassium), phosphate, and nitrogen (usually derived from natural gas). These are sourced from different parts of the world. For instance, about half of the world’s phosphate exports come from China, and that’s already problematic since China might face disintegration. Worse yet, those phosphate deposits are in interior regions prone to secession. So, say goodbye to that supply. Potash is mostly found in Belarus and Russia, but thank goodness for Saskatchewan in Canada. As for nitrogen, which is made from natural gas, it’s more widespread, with the U.S. being the top producer.

Without access to all these elements, growing food at scale becomes much harder. In a post-globalized world, the number of places that can sustain agricultural exports shrinks significantly.

At the top of that list is North America, particularly the U.S. and Canada. Saskatchewan has potash covered, the U.S. has plenty of nitrogen, and both countries boast some of the best farmland in the world. For phosphate, once you move away from China, you’ve got options like Morocco, Israel, Saudi Arabia, and even Florida.

Other regions in decent shape include Argentina, which has highly productive land, and South Africa, New Zealand, and Australia. While these countries, with the exception of Argentina, can’t produce their own fuel, they are outside major conflict zones. So, if there’s fuel and fertilizer available for trade, these are likely destinations, as they can pay in hard currency.

Brazil, however, is in trouble. It has some of the worst land quality globally and is the largest importer of fertilizer, relying heavily on China and the former Soviet Union. Brazil’s status as an agricultural powerhouse isn’t over yet, but you can see the sunset from here. Parts of southern Brazil near Argentina may fare better, but the explosive growth we’ve seen in soy production is temporary.

In the Old World, France stands out. Like Argentina, France has excellent farmland. It’s also far enough from conflict zones to remain relatively safe and close enough to the North Sea for natural gas. If there’s any international trade left, France is one of the few nations with a capable navy to secure its sea lanes.

But that’s still not enough. We’re looking at global calorie production potentially dropping by a third. And that means a lot of starvation.

Now, beyond staple crops like wheat, rice, corn, and soy, there’s also a thriving trade in specialty crops—cherries, apples, alfalfa, and more. In a post-globalized world, many countries will lose the ability to pay for these. If China is your primary customer, it’s time to look for a new market. The country that should be most concerned about this is the U.S., particularly California’s Central Valley. This area has extremely high production costs due to strict regulations and its desert-like conditions, which make input costs (water, for example) sky-high. It’s not naturally fertile land.

As long as inputs are cheap and China is willing to pay top dollar because they’re price-insensitive, this business model works. But that’s not going to be the reality much longer. So, check your specialty crops, see where they’re being sold, and figure out if those markets will hold up as globalization breaks down. If not, you’ll need to either switch markets or find a new crop.

Alright, that’s it for me. See you next time!

Will Climate Change Be the Death of Wheat?

A photo of a wheat in the winter

Although climate change models are still evolving, historical climate data shows a clear warming trend. So, let’s discuss the impacts of climate change, specifically who will be affected the most and who might even benefit from it.

When you think of climate change, think of it as an amplification of current conditions. So, hot and dry areas will likely become hotter and drier. Hot and humid regions are likely to get even wetter and face severe health risks. Agricultural zones in marginal climates will suffer the most, especially those dependent on wheat.

Speaking of wheat – humanity’s primary calorie source – you might want to enjoy that cinnamon roll and pasta while you have the chance…Okay, maybe that’s a bit dramatic, but you can expect production to decline and prices to soar. This will especially impact places like the American Great Plains, central Argentina, the Russian wheat belt, and northern China.

However, regions with dual wind streams are poised to do pretty well amidst the warming climate. Think of zones like the American South and Midwest, parts of Argentina, Uruguay, northwestern Europe, and New Zealand. Unfortunately for the Chinese, their agricultural regions are particularly vulnerable, which will lead to severe food shortages and famine.

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Support medshare's ukraine fund
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Transcript

Hey everybody, Peter Zeihan here, coming to you from Blue Lake at the border between Yosemite National Park and the Ansel Adams Wilderness. That’s the Pinnacles behind me, and let me tell you, the hike up here was quite the challenge! Today, we’re tackling a question from the Ask Peter forum: with climate change, where are we going to feel it first? Who’s going to be hit the hardest, and is there anyone who might actually benefit?

First off, let’s remember that our understanding of climate change is still developing. Yes, there are plenty of smart people studying it, but when it comes to understanding how the atmosphere works on a global scale, we’re learning as we go. I find it most reliable to look at the past rather than just the projections. We have over a century of climate data from most locations, tracking temperature, wind, and precipitation. If you look at what’s happened over the last 140 years or so since industrialization began, there’s been a clear uptick in temperatures.

By the time my fourth book, The End of the World Is Just the Beginning, was published, that temperature increase was 1.1°C over the entire period. In the last few years, it’s ticked up to 1.2°C. This doesn’t just mean that the world is getting warmer; it’s getting warmer in different areas at different rates. One key thing to remember about precipitation is that while warmer air can hold more moisture, it also requires more moisture before precipitation occurs. So, hot and dry areas are getting drier, and wet and hot areas are getting wetter.

As long as you have electricity, a degree Celsius isn’t a big deal. Take the United States, for example—back in the 1930s and 40s, Florida and Iowa had similar populations. Now, Florida’s population is about eight times that of Iowa, thanks to air conditioning and reliable electricity. But I’m more concerned about two specific regions.

First, the developing world areas that are already hot and humid, like Brazil, the northern coast of South America, sub-Saharan Africa, Southeast Asia, and the Indian subcontinent. These regions are already very wet, humid, and hot, and adding even a little more heat could be a serious health risk.

The second area of concern is agricultural zones that are already hot and dry. Agriculture tends to be concentrated in regions where specific crops grow best—avocados in California, wine in southern France, and so on. Wheat is the exception because it’s essentially a weed and will grow almost anywhere. As the world has diversified its agricultural production and globalization has spread crops globally, wheat has steadily been pushed to the margins, except in places like northern France, Quebec, and parts of Pakistan and India where it’s tied to cultural or food security.

Wheat is now grown in cold and dry or hot and dry regions like the American Great Plains, central Argentina, the Russian wheat belt, and northern China. This means that when climate change starts reducing moisture in these areas, wheat production will collapse, and prices will skyrocket. And since wheat has been humanity’s number one calorie source for millennia, this is a big deal.

But it’s not all doom and gloom—some places might actually benefit. Regions that receive moisture from two different wind streams, like the Gulf Stream and the monsoons, are less likely to suffer catastrophic crop failures because both wind systems are unlikely to fail in the same year. This is good news for the American South, the American Midwest, northern Argentina, Uruguay, northwestern Europe (especially the UK and France), and New Zealand.

However, most of the world relies on a single wind current, so even minor climate changes could have outsized impacts on agriculture, especially wheat.

Now, on my way down from the hike, it hit me that there’s a country out there with both monsoonal and jetstream moisture, and that’s not necessarily a good thing. In the American Midwest, both hit the same region, but in China, the monsoon affects the southern rice belt, while the west-east jetstream waters the northern wheat zone. This is bad news for China. Everything I said about wheat applies, but it gets worse because rice requires meticulous water management—flooding and draining the fields multiple times. If rain comes at the wrong time, the entire crop can be lost. So, no matter how climate change unfolds in the next few decades, we can be sure that hundreds of millions of Chinese people will be at risk of starvation.

Alright, now I’m really done. See you next time!

Why Should Red States Get Greentech Investments?

If the green transition is ever going to work, it needs to happen everywhere. So, don’t get your drawers in a bunch when you see green energy funds from the Inflation Reduction Act being invested in Red States.

While there may be more support for the green energy transition in blue states, the reality is that red states may offer a more viable path to ACTUALLY getting it done. Between business-friendly policies, more rural land suitable for energy projects, and a number of geographical advantages, red states will be critical to the green buildout.

While these red states might not be known for their environmental activism, their geographies make them prime locations for green investments…try not to think so much about ideology on this one, just focus on places that give us the best shot at making the green transition work, wherever that might be.

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Support medshare's ukraine fund
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Transcript

Hey, everybody. Hello from Square Top Peak, with Argentine Peak in the background, and further back, you can catch a glimpse of a pair of Colorado’s famous fourteeners. Today, I want to talk about green energy and red states. There’s been some hand-wringing in the environmental community because about 75 to 80% of the investment from the Inflation Reduction Act has gone into red states—not purple states, but solid red states.

First off, let’s all calm down. If the goal is truly to achieve a green transition, it has to include everyone, so this is actually good news. But I think it’s important to explain why this shift in mindset has happened on places like Capitol Hill when it comes to green tech investments.

The first reason has more to do with the business climate than the subsidies themselves. As a rule, red states tend to have a more business-friendly, low-regulation approach to things. Whether it involves providing a bit of money or just having lower legal costs for operating in the first place, it’s easier to get projects off the ground in a place like Nebraska than in a place like Oregon.

The second reason is related to the rural-urban divide. To oversimplify, red states are generally more rural and have a lot more land that can be dedicated to energy projects. For example, if you’re in New York City, you probably have a coal or natural gas power plant nearby, and the power is wired into the city. But if you want wind or solar energy, the closest place with significant solar or wind density is North Carolina, which has arguably benefited the most from green tech investments in the Northeast because it’s the nearest viable location for power generation.

In the U.S., we have what can be called a Sun Belt and a Wind Belt. The Wind Belt runs mostly through the Great Plains, from North Dakota straight down through South Dakota, Nebraska, Kansas, Oklahoma, and Texas. Colorado and Iowa also have significant wind resources. But generally, the further west you go, the better the wind conditions get. The same pattern holds for solar power. As you’d expect, the further south you go, the greater the solar intensity. Ideally, you also want a bit of altitude and low humidity because those conditions are more conducive to efficient solar power generation. So the primary solar zone stretches from east of Los Angeles in Kern County, California, through Arizona, New Mexico, Oklahoma, and especially Texas.

These two belts—the Wind Belt and the Solar Belt—are getting an outsized portion of green energy investments, along with North Carolina because of its proximity to major population centers that can’t generate their own green energy. The issue of population density is really significant. You’re not going to install solar panels in a forest or on the slope of a mountain unless it’s an absolutely perfect spot. You want large expanses of flat land where no one lives, and if that land doesn’t have much agricultural value, it’s even better. So places like West Texas, eastern Colorado, and North Dakota are ideal. These areas aren’t exactly known for being strongholds of environmental activism, but they happen to be some of the best locations in the country—and indeed, on the planet—for green energy installations. And that’s exactly where these investments are heading.