The End of Nuclear Arms Control

nuclear bomb with a mushroom in the desert

The last remaining US-Russia nuclear arms control agreement has expired, which means for the first time in decades, we’re in a world with no active nuclear arms control.

To be fair, it’s not like the Russians were honoring those deals even when they were in place. And given Russia’s war in Ukraine, negotiations for a new deal were a moot point. So, that leaves the world’s largest nuclear powers without limitations on their nuclear arsenals. Which means any other nuclear-capable power will be looking to expand or acquire its very own nuclear arsenal ASAP.

There’s a long list of countries eager to bolster security through nuclear armament, so a long period of nuclear proliferation is right around the corner…

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Transcript

Hey everybody. Peter Zeihan here coming you from Colorado today is the 4th of February. You’re gonna be seeing this in the morning on the fifth. And it’s a big day because for the first time in several decades, for the bulk of my lifetime, there is no active nuclear disarmament or arms control deal. In effect, the last one to start deal with the revised start deal, expired today. 

And there is really no appetite within the administration of the United States or the Russian Federation to negotiate a new one. What this means is we’re now in a situation where both sides have between 1000 and 2000 warheads, and there are no longer any legal restrictions on them expanding those arsenals. Now, some people try to put the blame for this on the Donald Trump. 

And I will not say that the Trump administration is really a champion of arm control in any form, but this is really mostly a Russian thing. You see, the The Russians know that they’re the strategically inferior partner in these deals. And the only reason that they were originally negotiated back in 1979 and 1985 is that they faced just a crushing, overwhelming American superiority in technology, reach and alliance structure. And so they knew that if there was a conflict, the United States had a bomber fleet, they had a missile fleet, it had a sub fleet, and they really just only had the missiles. 

And they were not confident that they could survive a first strike in order to deliver a second strike. So arms control back then was largely designed as a way by the Soviets to deflate tensions and eventually set the stage for a lasting detente that eventually ended the Cold War. Things really picked up after 1986, when Mikhail Gorbachev, who was really the only economist to ever run the Soviet Union, and he realized that the system was breaking and there was a limited amount of time. 

And so talks accelerated. And then in the post-Soviet system, under Yeltsin, we were no longer enemies. So getting rid of the thousands of warheads made a lot of sense to everybody. But in the time since that, we’ve had 20 years of Vladimir Putin and the Russians, rightly or wrongly, feel that the West has betrayed them time and time and time again. 

And the only way that they’re treated seriously as is if they’re threatened, the destruction of the human race with nuclear weapons. To that end, we’ve had two big trends that have happened in the last decade. Number one, bit by bit, the Russians have abrogated or cheated on every single one of the treaties in order to prompt the Americans to be the ones to cancel them. 

And Trump one did cancel a couple and others have expired. And so, you know, you can blame Trump if you want to. But the real fact was, is that the Russians were testing and fielding new weapons that were explicitly barred by the treaties and did it anyway, saying that they were still abiding by the conditions. The second issue, of course, is more recent with the Ukraine war. 

They’re in a hot war. And the idea that the Russians are going to voluntarily abide by any sort of meaningful arms control when they’re actually in the process of shooting a lot of people, is a bit rich, just like back in the late 70s and into the 80s, the reasons that the Russians thought they needed to do this is because they didn’t think that they could win on a field of battle. 

And unless and until they feel that way again in Ukraine, the chances of them going into any negotiations with good faith are pretty, pretty weak. Also, again, keep in mind that the Russians have abrogated or cheated on every single arms control treaty, nuclear or conventional, that they have ever signed. So any meaningful deal has to involve invasive inspections by both parties onto the other side in order to confirm these weapons are actually being taken out of service, dismantled, and eventually spun down. 

So they can’t be used, for weapons again, that requires a degree of intervention in the American military complex that we’ve done before. It would require a degree of intervention in the Russian complex that they have done before. it also would require a degree of trust on both sides that at the moment just simply doesn’t exist. 

And again, again, again, they are in a hot war. The Russians are in a hot war right now. So the idea that you can have American military and civilian personnel poking around into the Russian nuclear complex, it’s not feasible. 

So next steps. As to arms control, there really aren’t any, because until there’s a substantial change in mindset in Moscow, the idea that they’re going to negotiate with anyone in good faith simply evaporates. That leaves the situation open for everybody else. Now, the Americans and the Russians combined have over 90% of the nuclear weapons that are available in the world today. 

But they’re not the only ones. Israel has some, France and Britain have some. And the Chinese, of course, have a significant arsenal. Although it’s not merely in the same class as either Russia or the United States, unless and until we have some sort of deal between the Russians and the Americans and what a ceiling might look like, other countries not only don’t have an incentive to limit their own production of weapons, they have a very strong incentive to build more and more and more, not just to get to bigger tables, but to secure their own existence. 

And that is as true for China as it is for Israel and Pakistan and India and unfortunately, now true for Korea and Japan and Poland and Germany and Sweden and Finland as well. So we are not simply at the end of the great era of arms control that literally took tens of thousands of weapons out of circulation. We are now at the dawn of a new era of massive proliferation, because we no longer have a structure to limit it. 

And the changes to the international strategic environment basically demanded. Because if you’re a country that has been on the sidelines for the last 50 years and relying on the bilateral system between the Russians and the Americans to kind of keep a lid on things, and all of a sudden that is gone. You no longer have the time that is necessary to build up conventional force. 

Building up a nuclear force is the fastest way to get to a degree of security, where you actually hold some cards. And we are now going to see that in country after country after country after country for at least the next 15 years.

Electronic Warfare Innovations and Exports

Laptop with green coding and a server

Let’s talk about the current state of electronic warfare in the Ukraine War and how Iran is fitting into all this.

Drones are all the rage. You’ve got fancy autonomous systems, short-range with remote pilots, and fiber-optic tethered. The next logical step to countering drones is to beef up jamming capabilities; Ukraine has done just that. However, the Russians have taken this logic one step further. They’ve created a tool called the Kalinka. The Kalinka is a mobile detection system that listens for signals. This gives them an early warning for drone strikes and other signal-based attacks.

Electronic warfare innovations are spreading quickly, and this tech is already appearing in other regions. For instance, Iran used the Russian Kalinka tech to locate Starlink users during the protests, allowing them to shut down comms and suppress dissent.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Colorado, I hope everybody who is east of the Rockies is enjoying the cold front because, Canada worst. Anyway, today we’re talking about what’s going on in Ukraine and Russia and Iran from a technical point of view, specifically electronic warfare. Drones basically fall into three general categories. Number one, you got autonomous ones that can make decisions on their own. Those are incredibly rare and incredibly difficult to maintain because the chips themselves are unstable when there’s vibration or heat or cold or humidity or anything. So really, aside from a few here and there that are very expensive, not a lot of play. The second are those that you fly first person, and for that you have to have a connection to them somehow so that the telemetry can come back and forth and you can control them. 

Now, the United States does that with things like Reapers through satellite connections. The Ukrainians primarily do it on a shorter range, and the Russians also on a shorter range, typically no more than, 20km. And the problem with that is they can be jammed. And so both the Ukrainians and the Russians have gotten very, very good at here. 

I mean, I would argue that right now, today, Ukraine’s jammers are by far the best in the world, probably an order of magnitude better than America’s. Once you consider in cost. And then the third type is to do, fiber drones, which have a thin fiber optic cable that they drag behind. Now, these don’t have nearly as much range as a rule, but they can’t be jammed because there’s a hard line. 

And these, as a rule, are five kilometers or less. Although there are now some models where the fiber optic cable is light enough. You can go more than ten. Anyway, so those are kind of what’s going on there. But there’s another aspect to countering drones or any sort of electronic battle platform, that doesn’t involve jamming, but it’s still electronic warfare. 

And in this, the Russians have definitely, cracked the code on a new tech that is really interesting and has a lot of applications. So they call it the clinker. It’s basically a electronic warfare detection system that is mounted onto a truck or an armored vehicle. You basically drive around, find a place to park, and then you just listen and you pick up signals whether this is a cell phone or a drone connection or more importantly, in recent terms, as we’ve discovered, a, Starlink terminal. 

So one of the things that the Ukrainians have been doing is taking mobile Starlink terminals and putting them on things like drones, and then they go out into the Black Sea and blow up something that’s Russian. And the Russians don’t like that. But if you’re having a constant link in from a Starlink terminal and you can detect that, then the Russians finally have a way of knowing that it’s coming. 

I’m not saying it works perfectly. The range is only about 15km, and one of the CBP drones, they’re pretty quick. It’s not a lot of time to react, and it doesn’t jam the connection. It just detects it. So the Ukrainians have learned to turn things on and off every couple of minutes so that the Clinkers can’t, link up. 

But one of the things you have to keep in mind is that we’re in a fundamentally new type of warfare here, and when drones first appeared on the battlefield in a meaningful way that was not American. It wasn’t in Ukraine. It was in Armenia. We had a war back in 2020 between Armenia and Azerbaijan. And the as a region has had, Turkish drones that they basically used to completely obliterate the entire armed forces of Armenia in the disputed territories and would go on a crowbar. 

The Armenians weren’t ready for it. And so what we’re now starting to see is Ukrainian and Russian technology coming into other theaters and just completely wiping the board. So, for example, in the last couple of weeks, we have we’ve had those big protests in Iran, and people were wondering how the Iranians were able to shut down communication so effectively. 

Well, it now looks like the Russians gave the Iranians a few clinkers, and they basically just drove them around town, identified where all of Starlink’s were kicked in the door, shut the people involved, or brought them in for beating or imprisonment or whatever it happened to be. And lo and behold, the, situation from the Iranian point of view was diffused. 

So we now have a technology that has very, very strong implications for use in a civilian management system. We’re going to be seeing more and more things like this of technologies from a hot zone where they’re iterating every day and every week suddenly pop up in a theater that you wouldn’t expect, where it completely outwits maneuvers outclasses the preexisting systems. Iran is just a taste of what is to come on a global basis.

The Semiconductor Tariff Nightmare

A semiconductor chip

A poorly designed and destined to backfire tariff has just been announced; this time, the Trump administration has turned its focus to high-end semiconductors.

Putting tariffs on semiconductors is nearly impossible to do cleanly. There are thousands of types, production stages, and end uses. So, the Trump admin thought it would be a good idea to tariff them based on the end use, rather than where they’re made. The only problem is that most importers don’t even know the final use of the chips upon import, creating a legally and financially risky situation for everyone involved.

This tariff will likely freeze access to advanced semiconductors and choke the US tech and manufacturing sectors. There are a few ways around the tariffs, but those offer little relief to existing manufacturers. But hey, let’s just keep trying to jam this square peg into that round hole.rough strong alliances will struggle to survive. And the next generation of kids (however small that cohort might be) will be studying those countries in the history books.

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Transcript

Hey everybody. Peter Zeihan here, coming to you from Iowa. Today is the 15th of January, and the Trump administration has at long last announced the first wave of semiconductor tariffs, specifically targeting high end semiconductors. There was always going to be a question as to how this was done and whether it was going to be a disaster. 

It really matters because semiconductors are, for most intents and purposes, a commodity. They come in in thousands of forms and at thousands of different stages of production. There’s over 100,000 steps for high end semiconductor fabs creation. And they can come in as raw chips still attached to the disk. They can come in separated from those disk. 

They can be put into intermediate products like motherboards or charging stations. They can be included into intermediate products. They can be incorporated into final products. And so whatever type of tariff regime you’re going to put in there is obviously going to be full of flaws, even if it’s very, very, very well designed. And commerce was never set up to manage this sort of system, much less, Customs and Border Patrol. 

And that was before we had the personnel purges of last calendar year. So the questions were always, you know, how are you going to do this? Are you going to look like at a car? And the 1500 types of semiconductors that are installed within it have a different tariff rate for each one. Do you tariff the entire car tariff the chips independently? 

You do it based on the intermediate products. Based on where the value added happens. Basically, you could get more paperwork for one tariff on one vehicle than all of the rest of the 30,000 pieces in a car combined. What the Trump administration has done with this round is instead of going by sourcing, which would make a degree of national security sense, even, it would be, logistically almost impossible. 

They’ve decided to go on end use, which is, if anything, even more confusing, because now anyone who is importing these products has to decide what each individual chip is going to be used for. Declare that on the tariff form and the way that Customs and Border Protection enforces the tariff regime is to not check it on the front end, but to randomly check it on the back end and then really bring down a hammer in terms of fines and penalties. 

The problem is if if somebody is important to, say, 10,000 of a specific type of chip, they’re not the ones who are probably going to use the chip. The chip is going to go on and get put into computers or cell phones or pacemakers or whatever it happens to be. And so who is responsible for it? So the person who is doing the importing has to go and gets a customer affidavit and assign them to each individual box, each individual chip that Customs and Border Protection can then go into later a year from now, three years from now, and attempt enforcement. So what we’ve gotten is something that will freeze the use of semiconductors at the high end, because no one is going to know how to do the paperwork on the front end. It’s difficult to come up with something that is going to chill American manufacturing more, because now simply accessing the pieces in the first place is not going to happen cleanly. 

And you could open yourself up to legal liability simply from plugging a piece of typical technology into something that you’re working on, because you’re not the one who did the actual importing, but you’re probably legally liable. So we’re probably going to see a seizing up across not just the tech space, but the advanced manufacturing space in the United States, especially in places like heavy machinery, automotive and aviation, where these chips are used in the thousands in every single vehicle. 

It’s going to be very interesting to see how this goes. The Trump administration says it’s going to do a review after 90 days where if progress has not been made and expanding the supply chain within the United States, then, more tariffs will be coming. One of the many exceptions, because there are a bunch is that if you’re using these chips to expand the construction of a supply chain, you get a pass. 

But if you’re already have a supply chain, you do not. So this is a horribly designed tariff, absolutely the wrong tool for the job. And it’s going to become very obvious as this year rolls on, that it is actually going to poison most of what progress the US has made in its industrialization effort over the last decade.

The Death of the US Tech Sector: Part 2

processor and computer parts

Continuing our discussion on the US tech sector, let’s break down how demographics and rising capital costs are stifling innovation.

The tech boom relied upon a few things: a young, highly-skilled workforce concentrated in hubs like Silicon Valley and cheap and abundant capital. I don’t know if you’ve noticed, but the US doesn’t have the young workers or the capital environment to fund long-term tech development.

Combine that with what we discussed yesterday, and you get a tech sector that is going to struggle in the years and decades to come.

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Transcript

All right, Peter Zeihan here. Still in the hoover. Still talking about tech. We’re talking about the second problem now, and that’s on the front end. The tech sector isn’t just about manufacturing. It’s about imagining new products, imagining the future that is primarily done not exclusively, but primarily done in the United States and California. This is a Silicon Valley gig. 

Keep in mind that Silicon Valley does not do it alone. There are other places in the United States that are big on it. Austin, of course, is a big one. The Silicon Hills, Washington, D.C. is another. There’s three others. I can’t remember them off hand. I want to say Boston, but I can’t fact check myself right now. Anyway, what you do when you’re developing the tech sector is two things. 

Number one, you’re designing future products or you’re designing and implementing building software. Both of them basically follow the same process. You get together a bunch of relatively social techno nerds, put them together, network them together wherever they happen to be, preferably in the same room, and tell them to make shit up. And they hypothesize, and then they operationalize, and then they send it off somewhere else to be turned into a manufactured product or coded software. 

As a rule. The US tech age has boomed at the same time that this cadre of people, social tech minded individuals, the millennials, as we like to call them, have been, in their pre childbearing years, if that’s the right way to phrase this. And because the millennials started having kids on average 6 to 7 years after every generation before them, it gave a nice good run from roughly the year, 2005 until very recently. 

The second piece that you need in order to make this all work is just, gods and gods and drops of money. From the point that you rub two millennials together to see if you can get a spark, that doesn’t generate any money. And then they come up with the idea and that doesn’t generate any money, and then they build an operational plan and that doesn’t generate any money. 

Then they design the product, and that too doesn’t generate any money. Then you’re talking about either doing the coding still doesn’t generate money, or designing the products and figuring out how to build it. Still no money. All of those steps cost money. However, millennials don’t come cheap, especially with the skill sets that required for tech development. So you need the cost of capital to be relatively low, and the supply of capital to be as high as you can possibly imagine. 

And again, from roughly the year 2005 until very recently, that describes the United States to a T, the baby boomers were approaching retirement, but had not yet retired, and so they were shoving all the money that they could into the retirement accounts. And that money was being mobilized by whoever wanted to borrow. This is one of the reasons why we had 0% car loans for so long. 

It’s one of the reasons why subprime got so bad. The capital is so cheap, and it’s one of the reasons why the tech sector enjoyed its explosive boom. Everything from meta to AI. Well, folks, those days are over. At this point, over two thirds of the boomers retired. They’ve turned the bulk of their savings from relatively high velocity and applicable products, like stocks and bonds that could be used to lubricate the tech sector into things that are a lot less exciting, like T-bills, because if there is a market crash, they lose and they’re no longer earning income. 

So they don’t have much of a choice. Those that have decided to stay active in the market, well, they’re just stupid because the next time there’s a market crash and there will always be another market crash, they’re going to be broken. They don’t have to move in with their kids. The millennials imagine how that’s going to go anyhow. 

What this means for every industry is that the availability of capital has gone down. The cost of that capital has gone up. We’ve seen it in every industry. We’re roughly 4 to 5 times the cost of capital today that we were five years ago. You should expect that number to rise because remember, a third of the boomers largest generation ever, still haven’t retired. 

And the next generation down my generation, Gen X simply isn’t big enough to fill the coffers. So we’re facing a government fiduciary crisis as the volume of capital goes down, the cost of it goes up. That means debt servicing, for example. But it also means more expensive mortgages, as we’ve already seen, and less ability of the tech sector to tap capital markets on whatever terms they want. 

They’ll still be able to issue stock, raise money that way, general capitalization. But there are fewer players in the market now, so the demand for those stocks overall has to go down So the two big things that have made the tech boom happen are over. The millennials have to, abuse the term grown up a little bit and are more likely to have families now. 

And that means different sorts of jobs, different sorts of interactions. Also, they’re no longer in their 20s. The oldest millennials are now well into their 40s. Different sort of mindset. You want the Young bucks to be the one that are doing the software work, not some old codger. Yes, millennials, I just called some of you old codgers. We’re not going to think about what that means for me anyway. 

Combine that with more expensive money, and it’s difficult to imagine simply being able to build the workforce, much less pay for it over the time horizon that is required to develop these sorts of products. So in summation, the future of tech don’t look great. We’re not going to have nearly as many breakthroughs. They’re not going to come as fast. 

They’re not going to become as gigantic and on the back end. Even if we do get some. 

It’s going to be hard to manufacture them. We are losing the manufacturing capacity here in the United States. That would be part of that process. More of it is now going to Asia because of government policy. 

And when China cracks and it will, we basically lose access to a lot of the East Asian system. And if you think I’m putting this on China, it’s not just China. 

There’s a demographic bomb going off all over East Asia, most notably in North East Asia. The Koreans. 

Are not all that far behind. Neither the Japanese, but the Chinese are the core of it for this decade.

The Death of the US Tech Sector: Part 1

Photo of wires and tech

We’re doing a two-part series on the tech sector. Today, we’ll be looking at the disruption caused by deglobalization and Trump’s policies.

The gadgets and gizmos that fill our homes rely on highly complex supply chains, with most of that work happening in Asian countries. Any disruption to these interconnected networks could send devastating ripple effects down the line. US Tariffs on Asian imports discourage US participation in supply chains and incentivize companies to move production entirely outside of the US.

As tech manufacturing floods out of the US and we continue down this path of deglobalization, the future of American tech production looks worse and worse. Tomorrow, we’ll tack on the issues of demographics and rising capital costs.

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Transcript

Hey, all. Peter Zeihan here. I am in the Hoover Wilderness, which is one of my favorite spots on the planet. Lots of rock and water. Anyway, today we’re taking another question from the Patreon crowd. And specifically, what’s the future of the tech sector as everything Trump and everything de globalization kicks in? Well, the summation is it’s not pretty. 

There’s a lot going on. So we’re going to break this video into two parts. First we’re going to talk about classic manufacturing. Lots of folks think that all of our tech products and electronics in general come from China, but that’s a bit of a misnomer. China is a place where some of the parts are built. 

Certainly, and where a lot of the final stuff is assembled, but it’s not typically where it’s manufactured. And when you’re talking about tech products, you’re talking about not dozens, but hundreds and maybe even thousands of supply chain steps. For example, your typical laptop or smartphone has somewhere between 1 and 2000 pieces in it, and each of those pieces have their own supply chain. 

What happens in this weird world we live in of globalization is that the parts are made incrementally by different labor forces with different industrial plants, typically in different countries, and then those various components are brought together at a location and assembled into a sub piece. And that sub piece is then shipped off somewhere else, where it’s put into another piece, and on and on and on until you get your finished product. 

So when you’re talking about something like a smartphone, it probably touches 5 to 11 countries. On its way before it even gets to you. Much less before it crosses the Pacific. So East Asia, because of its widely differentiated supply chains and widely differentiated labor structures, is where most of this is done, because the high end is done in places like Korea or Japan. 

So we’re going to pause until the appeal is done. 

All right. Where was I? So the high end stuff. Taiwan, Korea, like Dram chips come from Korea. The GPUs that everyone obsesses about come from Taiwan. But the photo masks that make it possible to make these things. That all comes from Japan. The purified materials might come from the United States. The lasers from California, the etching machines from the Netherlands. 

Injection molding might be done in China. Wiring might be done in Vietnam. You get the idea. It’s a really big network. Any part of the globalization that hits any part of the world is going to break up those chains. And since roughly, 80, 85% of tech manufacturing is Asia centric, we’re looking at basically cascading failures. 

Because, remember, if you have a phone that has a thousand parts and you’re missing one part, you just have a really expensive paperweight. Anyhow, in this way, what’s going on with U.S. trade policy is, borderline suicidal because what it has done is put a tariff barrier between all the Asian countries and the United States, which actively, aggressively disincentivize this American participation in those supply chains. 

Because if you were once reliant on a part from, say, California, and now, shipping the inputs in from Asia to do the value add, has this onerous tariff cost upon it, you’re going to look to move that thing out of California to someplace like Korea or Japan. And so what we’re starting to see in the manufacturing space for tech is a de Americanization. 

Not that we were doing a whole lot of it either. Any way we were doing certain pieces, but there’s now no incentive for those pieces to stay here. So if you look down the road when globalization gets worse and say, when China goes away, we’re going to have very, very little to work from. We’re just not going to have tech products. 

Obviously, I would like to thank everyone sees that as a bit of a problem. If you want to move that stuff here, tariffs are absolutely not the right tool for the job. They do the opposite. That’s problem one. Next time we’ll talk it up. Problem two.

Where Would I Put a US Semiconductor Fab?

Semiconductor being made

If I were tasked with finding a location for a US-based semiconductor fabrication facility, where would I put it?

Well, just putting in a fab facility wouldn’t do much for anyone, as it ignores the enormous global supply chain that follows the fabrication stage. So, a better question would be “where would a full semiconductor ecosystem realistically go in the US?”

Places like the Texas Triangle, some coastal cities (think LA or San Fran), or western mountain cities like Denver might scratch part of the itch…but they either lack the workforce, the land, or the economics to make it work. The Midwest is the only feasible option; it’s scalable, has plenty of land and infrastructure, and has a strong blue-collar workforce that it can draw on from surrounding areas.

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Transcript

Hey, all. Peter Zeihan here. Coming to you from Colorado. Today we’re taking a question from the Patreon page. Specifically, if I were to dictate where a high end semiconductor fab facility should go in the United States for maximum outcomes, where would I put it? Well, let’s start by clarifying a couple things. Number one, semiconductor fab facilities, obviously an important part of the process, but they are one part of about 100,000 supply chain steps. 

From the point of imagining a semiconductor to actually getting a product, 30,000 moving pieces, over 9000 companies. Now, fabs are obviously importance where a lot of these pieces come together, but it’s not the high value part and it’s not the high employment part. It’s just a middle place where some things are done, important things, but all of the steps are important. 

So let’s talk about process on the front end. You want to design a semiconductor. Most of that work is already done in the United States. And once you figure out how to do it, you then go to the fab company and you basically have a conversation going back and forth where you figure out how X can become a product and you eventually build, an encyclopedia that’s basically instructions on how to turn this vision into reality. 

And then the supply company goes out and sources all of the materials that are necessary and makes sure that from a logistical point of view, they arrive at the right time in the right format, with the right purity. The next part of the process involves the fab. You basically take one of those purified products, silicon dioxide, melt it in a big that you put in a seed crystal, and over several weeks you draw it up and let the crystal form. 

Eventually you get a crystal that weighs more than a car. You then slice it laterally into thin discs. You dope it with chemicals to make sure that the pathways you want are represented in you then run it through the EUV system. Extreme ultraviolet. That’s a giant bus size structure that, can basically etch structures down to the atomic level, and then you bake it and then you treat it again, and then you zap it again, and then you bake it in. 

I make it that order, really. Is it treat, bake, etch or etch? Baked. Anyway, you do that several dozen times and eventually you get a disc that has several hundred semi-finished semiconductor circuits on it. 

That’s where the fab part stops, because then that just goes somewhere else and it is cut into the individual dyes. Those dyes are stacked and tested and packaged. 

Go into intermediate products that most people like, generically called chips. Then they go in to other things like wiring assemblies and motherboards, eventually built into things like system of a chip that goes into your phone, and then only then do they go into your computers and your phones and your cars and everything else. It is a very involved process, and it requires over an order of magnitude more labor and capital after the Fab than it does to actually build and operate the Fab facility. 

And one of the reasons why the United States has largely gotten out of the fab business is we have seen countries, most notably Korea and Taiwan, subsidize the crap out of doing it there. So we’ve taken the step that we’re not economically good at and let somebody else pay us to do it for us. So if you bring a fab back to the United States, not only do you have to overcome those subsidies, you actually haven’t solved your core problem of all the downstream manufacturing and processing. 

That’s not one company that is literally hundreds of companies. The labor force doesn’t just need to be large and well-trained. It also has to be very modular and adaptable, because what is demanded for the chips of today is not the same for the chips of six months from now or a year from now, much less three years from now. 

So everything that all of those downstream companies do has to be re fabricated over and over and over and over and over. And that requires a very different sort of approach to labor. And that’s not something that United States has historically done. Great. So where can you put this sort of footprint. Because it’s not necessarily about land and water and power. 

You do need this for the fact. I’m not saying that’s unimportant, but it’s really the more downstream stuff that requires a specific time of modular, adaptable workforce and large numbers. Most American cities don’t have that. When you look at places like Los Angeles or San Francisco or New York or Atlanta, there just isn’t really much of a footprint to put the fab in the first place. 

And more importantly, even if you could put it there, you don’t have a dense enough labor footprint with the right skill set in these places. Even where I live here in Denver might be able to put a fab very, very easily because there’s a lot of green space, but the entire Front Range has less than 5 million people in it, and that’s probably just not enough of a labor force. 

It’s necessary to do all the downstream testing, packaging, and incorporation into intermediate product TSMC has been setting up outside of Phoenix and Arizona, a place called Chandler, and has basically run into this problem over and over again. The state and the city can offer all kinds of tax benefits. The federal government can say, yes, put it there. 

But the greater Phoenix area has about the same population as the Front Range. And they’re really having problems establishing all of those downstream industries that are necessary to take these fab components and actually put them into anything we might use. So what we’re seeing is a lot of it just shipped back to Taiwan, where that ecosystem already exists. 

There was really only two places in the United States that you might be able to build that sort of ecosystem on anything less than a 20 year time frame. The first one is the Texas triangle, and that’s the zone of Houston, San Antonio, Austin and, Dallas. And there are a few semiconductor fab facilities there. The problem is that there’s probably no longer enough room in the labor force in Texas. 

Texas has been in relative terms, the fastest growing part of the country for the last 35 years, primarily because of the shale revolution and the NAFTA accords, which made Texas the primary interface between the United States and Mexico. But to make that work, the Texans have always needed people. And while yes, it’s a no income tax state and that matters a great deal, ultimately there’s a demographic story here that is starting to turn against them. 

They bring in people from the south, from Mexico, and further deeper into Latin America because of Houston. They bring people from abroad. But Donald Trump’s immigration crackdown has turned those net migrations inward into reverse. So we’re now net negative in Texas in terms of population growth when it comes to immigrants. Second, Americans used to flock to Texas for jobs, most notably Californians. 

But California has rebounded since Covid, and that flow is gone. And in addition, we now have had a series of presidents that have failed to deal with issues of rising living costs. And so we’ve seen significant drops in the birth rate across the country. That makes people a little bit less mobile, a little bit less willing to move for economic reasons. 

And more importantly, it just means we’re not generating enough babies sustain long term population growth. So calendar year 2025 is the first year in American history where the population has actually dropped, with the exception, of course, of the Spanish flu. And in the case of Texas, for the first time in 40 years, they’re no longer seeing the inflows of people. 

So their population has for the first time started to stagnate. That tells me that if you take all of the manufacturing that already exists in Texas, there might not be enough room for a fundamentally new sector that works very differently than everything they have in more traditional manufacturing, the only option that remains is probably where this is going to happen. 

And that’s the Midwest. The Midwest has a number of major cities, none of which are anywhere near as big as places like Houston, of course. But you have a lot of flat land. You have good infrastructure, road and rail link in the area together. You have a huge number of small towns that have still the highest birth rates in the country outside of the Mormon country, out in, Utah. 

And because of the legacy industries in this region that reach all the way back to the Steele era in the 1800s, you have a lot more blue collar workers than white collar workers. And most of these jobs in the post fab industry are some flavor of blue collar, mid-career training. 

There’s just kind of normal for these folks. So you could drop a semiconductor fab facility outside any of the major cities and be able to draw on the broader region, which has over 40 million people, fairly easily. This is one of the many reasons why Intel has chosen to put their new facility directly outside of Columbus, Ohio, to tap the broader Midwest worker community. 

You could probably do something very similar outside of Saint Louis or Minneapolis or even Chicago. And in doing so, tap a lot of these secondary cities that we think of somewhat accurately as time having passed by. And that’s true whether it’s green Bay or Milwaukee or De Moine or Indianapolis or any of the others. So if you’re looking for a full transplant, if you’re preparing for a world where the Chinese are gone and this is just a sector, we need to expand by an order of magnitude, the Midwest is probably where it’s at. 

But the obstacles are many. The investments will be huge. So whatever going to do front load it.

Kessler Syndrome and the Future of Space

An Artist Rendering of a Satellite in Space

Space debris recently struck China’s Tiangong space station. Given the congested nature of the ~350km altitude band, this collision is a warning of what might come to low Earth orbit (LEO).

We’ve got Cold War junk floating around, thousands of Starlink satellites, and plenty of debris zooming around at this altitude. Sure, there are ways to track incoming debris, but it’s imperfect (I mean, you try avoiding something going Mach 25). Kessler Syndrome is the main concern here; just ask Sandra Bullock how she feels about it following her role in Gravity.

Like everything else in the world right now, space is in flux. A hostile Russia, uncooperative China, and prickly US are all adding to the tension.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Colorado. And today we’re going to talk about space. Now, you may have noticed in the last couple of weeks there’s been a little bit of drama around the Chinese space station. It’s called the Tiangong. Short version. It got hit by a piece of space debris. Now, the Tiangong is in low Earth orbit at about 350km of elevation. 

And it’s a very, very, very busy shell around the world. Back during the Cold War, when we didn’t have particularly powerful rockets, this is where almost all the satellites were. So there’s a lot of old Cold War debris, especially Russian debris that hasn’t been maintained or even really kept track of on the Russian side for a few decades now. 

And it’s just obstacles. In addition, this is where Starlink does most of their operations, and there’s about 6000 Starlink, satellites there, more than everything else put together. Starlink plans to do another 3 or 4000 over the next few years. And other entities, whether they’re European or Chinese, that are talking about building their own satellite network for broadband, are talking about using the same band. 

So it’s a very, very, very busy area. And that’s before you consider the thing young, which was the satellite that the Chinese had, that they shut down their own about ten, ten, 15 years ago now. Yeah, 15 years ago now, without understanding orbital orbital mechanics. And so it generated 15,000 pieces of debris, of which 2000 are still up there, and they regularly intersect this elevation at 350, kilometers. 

Now, why would the Chinese put their station there? Short version is they didn’t have a choice. One of the things that people forget when they compare, American technology and Chinese technology is the Chinese are in almost all sectors, more than one generation behind. And when it comes to things like aerospace or space travel or ships that means all of their vessels are a lot heavier. 

And so the sheer throw weight that they need to get to get into orbit, requires a lot more powerful rockets, which they don’t have. And so they can’t go as high. They just don’t have as much of a massive budget as, say, the International Space Station. And it sponsors do. The Russians intelligently have chosen to not share rocket technology with the Chinese because they know they would be a target of it anyway. 

So the Chinese are a generation, maybe two generations behind, and that leaves them stuck down here. So what happened was this piece of space junk hit them? And it’s a couple things to keep in mind here. Number one, in addition to being very, very busy, there is a lot of tracking up there, but it’s clearly not perfect. 

And just because you see something coming doesn’t mean you can get out of the way of it. So, luckily, nobody was killed. Luckily, they had a replacement, vessel that they could send up. Luckily, they could bring everybody down safely. 

There’s no reason to expect that. That’s going to be the new norm, though. Oh, by the way, the ISS over about 400km. So we’ve got a little bit more wiggle room in the international system there. Okay. Why am I bringing this up? Couple things. Number one, my broadband out here in the mountains sucks. I have a Starlink, corporate account, which is supposed to give me 25 to 30 And PBS. 

Every second, and instead I get closer to ten. So this video I’m recording right now will probably take me over four hours to upload for you. The reason is very simple. Starlink has sold a lot of subscriptions to support the satellites that are up there. And what they’re discovering is that the profit curve is not what they had hoped it would be. 

Because the more people who sign up, the lower the bandwidth is for everybody else, which means the more satellites they need to send up. But to send up the satellites, they need more subscriptions. Whether or not this is a long term model that is viable remains to be seen. But it is certainly not the cure all that a lot of us thought it was going to be a couple of years ago. 

And the only solution is more and more and more and more and more and more, more satellites in that same band. Because if you put the satellites higher, number one, it takes a lot more energy to get them up there. And number two, if something does go wrong with a satellite in a higher altitude, it’s a lot harder to deorbit it. 

And instead of staying up there for 2 to 10 years, it stays up for 15 to 20. And the reason that gets really important for everyone real quick is something called the Kessler syndrome. If you’ve seen the movie gravity with Sandra Bullock, you have some idea what I’m talking about. Basically, a satellite blows up for whatever reason, sends all kinds of debris out, and then that debris hits other things and causes more debris and more and more and more. 

And eventually all of low-Earth orbit becomes nonfunctional for purposes of space exploration or satellites of really any type, because slow moving pieces, in low Earth orbit move it about mock 25, and a paperclip at that speed is more than enough to ruin the day of any satellite and generate a lot more paperclips. So we’re in this interesting catch 22, and that the only way to deepen and improve space technology is to put more stuff up there, which puts us at the risk of ending everything that is up there. 

And now we’ve got the Russians, who are one of the best space powers, suddenly being hostile to everybody else, the Chinese refusing to cooperate in international fora, and the United States to put it mildly, is becoming a little persnickety know about a great many things. it adds up for an incredibly dangerous and, crisis prone, environment and low Earth orbit. 

About the only bright side I can tell you is that if we do get a Kessler and low Earth orbit, everything will probably de-orbit in under a decade, and then we can try again. So perhaps, just like with everything else in the world right now, as the globalization kicks in, we’re going to be taking about ten years off from everything.

Can 3D Printing Save US Manufacturing?

A 3D printer

We’re entering an era where restructuring global manufacturing will be non-negotiable. As supply chains collapse and tariffs complicate this process, can technology like 3D printing take some of the pressure off?

Investments in US manufacturing have declined under Trump’s protectionist policies, since relocating abroad can help avoid the tariff rabbit hole. 3D printing offers a promising solution for reshoring some of that manufacturing, but it’s too inefficient for large-scale production as of now.

As 3D printing improves and finds niches that align, this could be a disruptive technology. However, we won’t be replacing mass manufacturing with these printers anytime soon.

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Transcript

Hey, all. Peter Zeihan here. Walking down Indian Creek on my way out. Dreaming of Mexican food. But you know that’s not going to get satiated. Because there’s no good Mexican food anywhere near Denver. Anywhere. Today we’re taking a question from the Patreon crowd. And specifically, it’s, building off of some of the concerns that I’ve had with manufacturing. 

The short version is that the more complex the manufacturing system is, the more countries are involved. So when you put tariffs on the import of manufactured goods, either the finished product or the parts, what you’re basically saying is I don’t want to participate in the supply chain because it’s cheaper for everyone to move their production base out of your country. 

And then just import the finished product at the end of the day. Otherwise they have to pay the tariffs two, three, four, ten times. It’s one of the reasons why, the Trump tariffs are actually reducing investment in physical plant in the United States and reducing the amount of manufacturing products that we’re actually producing anyway. The follow on question from that is, is there a technology out there that might help us to get around that? 

And there, there might there might be, something called 3D printing. Basically, you take a powdered substrate, whether it’s a plastic or a metal, and then you sinter it with a laser, and grow a product. It’s often called additive manufacturing as well, instead of subtractive manufacturing. So subtractive manufacturing was more like punch holes and things. And you start with a block of material and you whittle it down until you have what you need. 

Additive manufacturing or 3D manufacturing? 3D printing is the opposite as you build it up layer by layer. Now, there are plenty of things that this looks very promising for. But the key thing to remember is if it has moving parts, especially moving parts that are different materials. It’s not that this technology cannot be used, it’s just that there are some pretty sharp limits materials, printers that can handle more than one type of material are pretty new, really just in the last 510 years. 

And the speed at which you can do things like this is very slow. So it’s very popular in things like, prototyping where every prototype is unique and then it doesn’t matter if it takes you hours to days to print the product. It’s also very popular in things where, abnormal shapes rule. So especially if you need a lot of strength but not a lot of weight. 

So you’re going to leave holes or bubbles within the material. So for aerospace, there are actually examples of 3D printers already on production floors and to a lesser degree in automotive as well. But the big thing to keep in mind here, speed, in the time that it takes you to stamp 100 products, you’re probably only going to make one 3D printed product, and so while 3D printing is getting incrementally better day by day and that’s great. 

And while it will undoubtedly, as the cost of manufactured products go up, as the globalization kicks in, it will obviously find more and more niches, where it’s the applicable technology, but it will always be coming from behind when it comes to mass application because of that speed issue. So I like the technology. I like the way it’s going. 

We should hurry up and get there.

The AI Race to Regression

The Open AI chatGPT logo on a phone

The AI race has been all the rage, but what if we were racing ourselves straight into regression?

OpenAI’s ChatGPT-5 is extremely powerful; however, it’s less user-friendly than its predecessor and is optimized for institutional users. Industrial and research applications are where the real power of AI lies. So, what happens when those energy-intensive data centers begin to falter?

Well, as globalization breaks down, that faltering is going to become a very real concern. Without an ecosystem that produces and shares all of the necessary components to make these AI behemoths run…we could see a technological regression that threatens the future of AI as we know it.

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Transcript

Hey everybody, Peter Zeihan here coming to you from McCurdy peak. Well, the actual peak is there. Anyway, Peter Zane Company from Colorado. Today we’re taking another question from the Patreon page. Specifically, can you please explain to me this new space age that we’re in the race for artificial intelligence, and what we should look for, what we should worry about? 

Well, let’s start by saying that most of the things that people are talking about with AI are generally, not quite on the mark, for example, a lot of folks think that, OpenAI, that’s the premier artificial intelligence company in United States, that their new program chat, GPT or 5.0, which is supposedly an upgrade, is actually a significant downgrade. 

They find it not as user friendly, not as personable, not as complete. That’s for personal users. AI affects potentially thousands of different applications, and how most people interact with artificial intelligence is in some sort of first person single seat. interface. Like what you get on your phone or your laptop. 

I mean, I’ve got that way too. And the jump from chat GPT four to GPT five was not designed for your single user. It was designed for people who do code for people who designed drugs. It’s designed to bring a huge amount of processing power to things on the back end to basically recreate something. So the institutional users, the design users, they’re actually finding ChatGPT all kinds of fun. 

And some Altmann, who is the CEO of open AI, is going back and kind of taking some characteristics from ChatGPT for to put it in the chat, GPT five, in order to make everybody happy. So that’s all going to work out. Here’s the problem. Software versus hardware. If I’m going to really sum it up, it’s that 

Chat GPT for the algorithm that we all found so groundbreaking really only took up about ten terabytes. And you could easily carry that on thumb drives in your hand. Chat GPT five, more advanced, is at least twice that, probably three times. But OpenAI is not saying. So we don’t know that number for sure. 

The point is, in terms of the raw memory required to make the AI function, it’s really not that impressive. And so if, the corporate espionage or an act of benevolence, OpenAI were to lose control of the algorithm and it got out there in the wild, so to speak, it really could be used by almost anyone. What makes a AI function in the way that we think of it today? 

Not this Skynet future thing, but how it is now requires massive amounts of processing power at data centers. The largest data centers that the world has ever seen are needed in order to deal with the inflow of requests that come in, run the algorithm and spit out the results. Which means that the limiting factor, for the moment, in artificial intelligence isn’t the software, it’s the hardware. 

And this is where we have a really big problem, and it’s not that far away. The ability to make the high end processing chips that Taiwan is famous for, requires, 100,000 steps, 30,000 pieces, 9000 companies, and they’re scattered around the world. The single biggest concentration is then the United States, which is something Americans conveniently forget when they’re talking about sovereignty. 

Number two, concentration is on the Taiwan centric zone. The single most important company is in the Netherlands, but it has facilities in Germany and in Austria and in California, in Japan. But you’re never going to be able to do the chips at all without all of these steps. And a lot of them are single point failures. 

So if you have any degree of globalization, it doesn’t matter really what the countries. It falls out of work. We can’t make them at all. And for the chips that we already have, life span when they’re in a data center is typically in the 3 to 6 year range. So when we get to the point where we realize that we can’t make the chips, we’re going to have a bit of a scramble to see who can control what’s left. 

And then the ability to use AI will shrink from something that you can all have on your phone to simply the handful of entities, whether governments or corporations, that are capable of having their own data center so they can run by themselves and that will be it. Until we reinvent the entire ecosystem and what we have been seeing with most government efforts around the world, including the United States, to reassure the sort of manufacturing it only focuses on the fabrication facilities, which is what is in Taiwan. 

It ignores the design, it ignores the material inputs, it ignores the photo mask, it ignores the wiring, ignores everything else that goes into a successful chip, much less the downstream stuff like testing and packaging that ultimately makes the stuff that ends up in a data center. No one, to my knowledge, is putting any effort into actually bringing the entire ecosystem under one roof, and I honestly don’t even think it would be possible anyway. 

There are too many pieces. There are too many players. And and if you’re looking at the United States, there are not enough technicians that are capable of doing it because we already have record low unemployment levels. So we are in a moment right now where AI is possible with ChatGPT 5.0 and all the rest that will not last. 

And in the not too distant future, we are going to see a technological regression as we lose the ability to make the hardware. And since it took us 60 years to figure out how to do that in the first place, it’s not something that we’re going to do in a season is going to take a mastery. Industrialization process of different parts of the world to do different things, coming together in different ways. 

And that is something that I am not looking forward to. But we’re going to see at the beginning of that within this next decade.

The Fourth Shale Revolution: Supermajor Tech

ExxonMobil neon sign at a gas station

ExxonMobil has introduced a new type of proppant that might just spark the next US shale revolution.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Los Angeles on the California coast. And today we’re to talk a little bit about oil. There have been a couple of technological breakthroughs that I think are worthy of mentioning in the shale era. So ExxonMobil, big company, one of the largest players in the world, produces just under 5 million barrels a day. 

Has basically started mucking around with something called prop. So dial back…Hydraulic fracturing or fracking was basically how the United States produces 80% or more of its crude oil these days, as well as the vast majority of its natural gas. It’s not a fringe technology. It’s the backbone. What you do is you drill down vertically, and then you make a horizontal split that goes two, three, four, maybe even five miles. 

And then you inject water that is laced with sand. The water hydraulics, does not compress under pressure. So it cracks the rock apart. And then the water goes in with the sand and accesses tiny, tiny, tiny, tiny little deposits of petroleum. Then you stop the pumping. And because those tiny pockets of petroleum have now been exposed, they produce a back pressure that pushes the water out, but the sand stays lodged in the cracks, keeping them open so the flow can continue. 

The sand is called it, and it’s one of the biggest expenses in a fracking operation. Well, what ExxonMobil has now done is change the prop and is triggering what is basically the fourth shale revolution back backstory for that first shale revolution is when we figured out how to do this and brought out natural gas. The second shale revolution is when we figured out how to do this to bring out liquid oil. 

The third is when we built the infrastructure. Things like LNG facilities or chemical facilities or refineries to metabolize all this raw product where we’re now producing all of that stuff, all of that’s in the past. Fourth Revolution is taking the capital and the technological skillsets of the majors, like Exxon, and applying them for a whole new generation of technology. 

So one of the weird things about the shale revolution is when it started most of the super majors and kind of written off the American oil patch, and we had seen oil output from the United States dropped to historical lows well over the last century and a half. 

What that meant is we had small mom and pops that were doing everything, and they were trying everything they could come up with in order to get incremental increases. 

And that’s what generated the first few million barrels a day. Well, as time went on, oil does what oil does. And it rises and it falls and it rises and falls. And so we got a series of busts, and ExxonMobil was able to come in with its better capital position and buy up a lot of the smaller companies, to the point that it and Chevron now dominate the space and collectively produce almost 9 million barrels a day. 

Now you apply what Exxon has across its entire value chain, and you get a very different proposition. So for profit, specifically what we’re talking about today, they went into their refineries and they found waste product, something called petroleum coke. And they were able to manufacture that into a kind of a synthetic sand, if you will. The profit is where a lot of experiment has been going on and a lot of subsectors for the last several years, and you got some pretty expensive stuff that’s called ceramics called ceramics. 

It is ceramics. Petroleum coke is cheaper than that, more expensive than sand. But the real advantages it has that it’s a lot less dense, maybe 40, 50% less dense than sand, which means you can suspend it in the water better, which means it pushes into the formation better, which means it holds open cracks deeper in the formation. 

And for a small increase in cost, using what used to be a waste product. Exxon has seen their numbers increase by 10 to 20 to maybe even 30% in some wells. And that alone changes the math of the shale revolution a ten to a 30% increase in output for only a slim investment in what was a waste product. 

That’s amazing. And so the shale revolution is nowhere near done. You’ll hear people saying that eventually the shale revolution going to run out. There’s only much oil, but that misses the point. In the pre shale era, we were able to access about 10%, 9 to 10% of global energy reserves. There’s a lot down there that we just don’t have the technology to get to. 

The shale revolution doubled the percentage of what was accessible within the US space. So we’re talking about 150 years of output. All of a sudden we have access to something like that again. And we keep making these incremental increases, like with profit, that pushes the horizon back even further. So the shale revolution continues to set new records for output, adding somewhere between a half a million and a million barrels a day per year, and has now been doing that since 2009. 

You get a lot of output when you do it for that long. So this year is not the last year the shale revolution. Neither is next year or the year after or the year after that. 

Because the numbers keep getting better, the technology keeps pushing further, and the break even cost for what it takes to get a chunk of oil out in an economically viable way keeps going down.