Venkatesh Rao is one of the silent giants of thinking when it comes to technology, culture and the world at large. Longtime online writer and someone who has shaped the thinking of many important people. Grok describes him: “Rao is influential in certain tech, futurist, and "indie thinker" circles for his dense, insightful, and often contrarian takes on strategy, organizational behavior, and emerging systems.”
I am a big proponent of Reindustrialization of the West, particularly in America. I realized in 2022 how all the lessons I learned during a time of great globalization and digitalization were no longer as relevant. Most of all the world has dramatically changed. Few right thinking geopolitical analysts would argue anymore against Reindustrialization. But it takes an original thinker like Venkatesh to not just reframe the importance of reindustrialization but to re-categorize and articulate this movement in a new way: https://contraptions.venkateshrao.com/p/a-tale-of-two-theories-of-coordination
You absolutely need to read the whole thing a few times. I certainly did. It took me a few times to fully grok it. Rao talks about the disconnect in global macro:
“There is a persistent disagreement about the macroeconomic moment. One camp sees the world as still in a leverage cycle, pointing to massive AI investment, persistent fiscal deficits, and buoyant equity markets. Another sees an unmistakable deleveraging, pointing to commercial real estate, slowing globalization, higher interest rates, demographic aging, and cautious consumers. Both are right, and both are wrong, because they are asking the wrong question.”
He is describing the rise of National Capitalism.
"Call it thick sovereignty.
The central premise of thick sovereignty is not that states should replace markets. Rather, it is that states must underwrite the critical coordination capacities upon which markets ultimately depend. Semiconductor manufacturing, electrical grids, ports, cyber defense, energy systems, defense industrial bases, strategic mineral supply chains, payment infrastructure, and domestic manufacturing capability are no longer viewed merely as sectors of the economy. They are treated as strategic coordination assets.
These investments often appear unattractive through the lens of traditional return-on-investment analysis. A semiconductor fabrication plant built for geopolitical resilience may never achieve the lowest production costs. Maintaining excess electricity generation capacity may appear inefficient. Building redundant logistics networks lowers measured productivity. Strategic reserves produce no quarterly earnings.
Yet these investments optimize a different objective function.
They are not expansionary investments.
They are option-preserving investments.
Their purpose is to buy adaptability under conditions of profound uncertainty. They resemble insurance, but only superficially. Insurance assumes known probabilities. Thick sovereignty operates under Knightian uncertainty, where the relevant risks cannot even be fully enumerated. The investment is not a wager that a particular crisis will occur. It is a wager that maintaining the capacity to respond to unforeseen futures has become more valuable than maximizing static efficiency."
Rao gets more specific:
“The world is not moving from globalism to autarky.
It is moving toward a different architecture consisting of thick sovereignty resting upon a thin cosmopolitan floor.
The thin cosmopolitan floor includes those systems whose reversal would destroy more value than it could ever create. Global shipping, reserve currencies, payment systems, Internet protocols, scientific standards, aviation, commodity markets, satellite infrastructure, and core scientific collaboration all remain indispensable. They are becoming less like speculative growth sectors and more like civilizational infrastructure.
Above this floor sit increasingly sovereign coordination systems. States compete over industrial capacity, energy security, technological leadership, defense, strategic manufacturing, and AI capability while continuing to rely upon a common global substrate that makes these competitions possible.
This explains why globalization appears simultaneously alive and diminished. The floor remains intact. The speculative premium once assigned to extending it indefinitely has disappeared.”
This is why reindustrialization is not just a ‘nice to have’. It’s a must do. It’s the new imperative for any country, big or small, that cares about their sovereignty. It may be the difference between their independence or not.
This has big implications for organizations and individuals.
“Business leaders should ask not merely whether a project generates returns, but which theory of coordination it strengthens. Does it expand humanity’s capacity to create new surplus? Does it preserve adaptability under uncertainty? Does it maintain indispensable systems upon which everything else depends? Or does it merely assume that the old cosmopolitan model of ever-cheaper, ever-denser private coordination will automatically resume?
Individuals face similar choices. Careers increasingly reward those who build new coordination technologies, strengthen strategic capabilities, or maintain critical infrastructure. Institutions that organize around these imperatives are likely to enjoy easier access to capital, talent, legitimacy, and political support than those organized around assumptions that belonged to the previous era.”
Net net: reindustrialization is a mega trend and will be driven by a wall of money as every government and business wakes up to this. Trillions of dollars worth. Position yourself and your investments accordingly.
Rao provides a re-frame that not just helps increase your understanding of where the world is going but how we got here. This invaluable insight can help private investors like myself gain new alpha. Or at minimum a better understanding of what is happening in the world right now.