Investment Implications of the AI CapEx Boom | Chase Taylor

In Episode 449 https://hiddenforces.io/podcasts/investment-implications-of-the-ai-capex-boom-chase-taylor/ of Hidden Forces, Demetri Kofinas speaks with Chase Taylor, head of research at Bulwark Capital Management and founder of Pinecone Macro Research about investment opportunities around the buildout of the new "electric stack" and the AI CapEx Boom that relies on them. Chase and Demetri spend the first hour of this episode exploring his methodology, how he extracts signals from noise, and why a multidisciplinary approach to investing is especially important during periods of disruptive sociopolitical and technological change like the kind we are experiencing today. They then apply these ideas to two important technological trends underway in the global economy: (1) the transformation of the so-called "electric stack" or electro-industrial stack and (2) the AI CapEx Boom that relies on it. They begin with a deep-dive exploration of the dramatic cost declines happening across the entire electric stack, beginning with the addition of new sources of energy, advancements in battery technology for storage, the use of magnets and motors that turn electricity into mechanical motion, power electronics that shape it into the precise force needed by today's technologies, and the embedded compute that orchestrates and decides how and when to put that force into action. They discuss the sources of China's dominance in this industry, the horizontal complementarities in its manufacturing ecosystems, the advantages of vertical integration, and what America and Europe need to do in order to remain competitive in this new industrial ecosystem. The second hour is devoted to exploring the implications for investors of the current AI CapEx boom, how the USD might behave in a growth slowdown scenario post-Liberation Day, and what the Trump administration's military and covert action threats against Maduro's regime in Venezuela can tell us about his foreign policy and whether we are returning to a more colonial phase of domination by the American empire over the Western hemisphere. Subscribe to our premium content—including our premium feed, episode transcripts, and Intelligence Reports—by visiting HiddenForces.io/subscribe https://hiddenforces.io/subscribe. If you'd like to join the conversation and become a member of the Hidden Forces Genius community—with benefits like Q&A calls with guests, exclusive research and analysis, in-person events, and dinners—you can also sign up on our subscriber page at HiddenForces.io/subscribe https://hiddenforces.io/subscribe. If you enjoyed today's episode of Hidden Forces, please support the show by: Subscribing on Apple Podcasts https://podcasts.apple.com/us/podcast/hidden-forces/id1205359334, YouTube https://www.youtube.com/channel/UC8URhgYos5fjHqFSO4RSIEg, Spotify https://open.spotify.com/show/0TK6u251zGSlMgJKH6cOaP, Stitcher https://www.stitcher.com/podcast/demetri-kofinas/hidden-forces, SoundCloud https://soundcloud.com/hiddenforces, CastBox https://castbox.fm/channel/2629539, or via our RSS Feed http://hiddenforces.libsyn.com/rss Writing us a review on Apple Podcasts https://podcasts.apple.com/us/podcast/hidden-forces/id1205359334 & Spotify https://open.spotify.com/show/0TK6u251zGSlMgJKH6cOaP Joining our mailing list at https://hiddenforces.io/newsletter/ Producer & Host: Demetri Kofinas Editor & Engineer: Stylianos Nicolaou Subscribe and support the podcast at https://hiddenforces.io https://hiddenforces.io/. Join the conversation on Facebook https://www.facebook.com/hiddenforcespod/, Instagram https://www.instagram.com/hiddenforcespod/, and Twitter https://twitter.com/hiddenforcespod at @hiddenforcespod Follow Demetri on Twitter at @Kofinas https://twitter.com/kofinas Episode Recorded on 11/10/2025

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Demetri Kofinas?

  What's up everybody? My name is Demetri Kofinas and you're listening to Hidden Forces, a podcast that inspires investors, entrepreneurs, and everyday citizens to challenge consensus narratives and learn how to think critically about the systems of power shaping our world. My guest in this episode of Hidden Forces is Chase Taylor, Head of Research at Bulwark Capital Management and the founder of Pinecone Macro Research, where he publishes deep dive macro analyses informed by his relentless curiosity and commitment to systems-level thinking and strategic foresight. Chase and I spent the first hour of this episode exploring his methodology, how he

• 0:41Demetri Kofinas?

  extracts signal from noise, and why a multidisciplinary approach to investing is especially important during periods of disruptive socio-political and technological change like the kind we are experiencing today. We then apply these ideas to two important technological transformations underway in the global economy. The first is the transformation of the energy system and the dramatic cost declines we are seeing across the so-called electric stack. This begins with the addition of new sources of energy to the electric grid, advancements in battery technology for its storage, the use of magnets and motors that turn that electricity into mechanical motion, power electronics that shape it into the precise force needed for today's technologies, and the embedded compute that orchestrates and

• 1:26Demetri Kofinas?

  decides how and when to put that force into action. We discuss the sources of China's dominance in this industry, the horizontal complementarities in its manufacturing ecosystems, the advantages of vertical integration, and what America and Europe need to do in order to remain competitive in this new industrial ecosystem. The second hour is devoted to exploring the implications for investors of the current AI capex boom, how the US dollar might behave in a growth slowdown scenario post-Liberation Day, and what the Trump administration's military and covert action threats against Maduro's regime in Venezuela can tell us about his foreign policy, and whether we are returning to a more colonial phase of domination by the American empire over the Western Hemisphere.

• 2:12Demetri Kofinas?

  If you want access to this part of the conversation and are not already subscribed to Hidden Forces, you can join our premium feed and listen to the second hour of today's episode by going to hiddenforces.io/subscribe. All of our content tiers give you access to our premium feed, which you can listen to on your mobile device using your favorite podcast app, just like you're listening to this episode right now. If you want to join in on the conversation and become a member of the Hidden Forces Genius Community, which includes Q&A calls with guests, access to special research and analysis, in-person events and dinners, you can also do that on our subscriber page. And if you still have questions, feel free

• 2:53Demetri Kofinas?

  to send an email to [email protected] and I or someone from our team will get right back to you. Lastly, because this conversation deals with investing, nothing we say on this podcast can or should be viewed as financial advice. All opinions expressed by me and my guests are solely our own opinions and should not be relied upon as the basis for financial decisions. And with that, please enjoy this wide-ranging and in-depth conversation with my guest, Chase Taylor.

• 3:30Demetri Kofinas?

  Chase Taylor, welcome back to Hidden Forces.

• 3:34Speaker 01

  Great to be on with you. Appreciate it.

• 3:36Demetri Kofinas?

  You were on with Zach, your colleague at Bulwark Capital Management. We're actually all friends, but you and Zach work together. Zach's the principal and CIO of Bulwark. You guys are also members of the Genius Community and have joined us at many of our dinners and online Q&As. But you guys were on the podcast like, what was it, like two years ago or something like that? It feels like a long time ago.

• 3:59Speaker 01

  I feel like actually maybe nine, 10 months ago or something?

• 4:03Demetri Kofinas?

  No.

• 4:03Speaker 01

  Maybe. I promise.

• 4:05Demetri Kofinas?

  Really? Wow. I gotta go back. I gotta go back and check. So it's great to see you, man. This is the first time you've been on alone. You're also the founder of Pinecone Macro Research, which produces fantastic research reports. And I've spent the last couple of days reading through your most recent ones. Even though people have had a chance to, many of our listeners have had a chance to either read your work independently or listen to the episode where you came on with Zach, some may not, some may need a refresher. So just give me a quick reminder here, a quick rundown of who you are, your background, and what it is that you do and what Pinecone Macro Research is.

• 4:40Speaker 01

  Yeah, so I'm a country boy from rural southeast Texas originally. I spent 17 years in the Air Force doing bomber avionics and then geospatial intelligence and then I was an acquisitions officer. So bring kind of three different careers inside of the Air Force to a kind of a weird skill set that I've put together. And then I have a master's degree in foresight, which most people don't know anything about, obviously, which is basically is like the study of change and trying to figure out what the future may look like, essentially. People call themselves futurists, you know, they get that degree, but I don't really use that term too often. But I fell in love with

• 5:21Speaker 01

  finance during and after the GFC. I started learning about economics because of it. I just couldn't wrap my head around how so many people could be so wrong and so many people could get that hurt by it. So that was like the genesis of my love for markets and everything that ties into them, which is, you know, essentially everything. I mean, I was in, I joined the Air Force in 03 and so, or excuse me, 06. So like right after that was when I started doing this. The interest kind of kept growing for me. Next thing I knew, I was like writing about it, just doing like a free blog and stuff while still in the Air Force. But then in 2018, and I still had a few years left, I, that was when I started the business. So I essentially had two full-time jobs my last few years

• 6:06Speaker 01

  in the Air Force. And now, as you mentioned, I'm with Zach at Board Capital as a head of research. So I'm basically just a research nerd for, for the firm and helping with the portfolio and then, you know, for my, my research clients as well.

• 6:20Demetri Kofinas?

  So what exactly is in the degree of foresight? Like, what do you actually learn?

• 6:25Speaker 01

  Yeah, so you had just read the most recent piece that I wrote and I talked a good bit about systems thinking. That was actually one of the classes I had to take, but foresight, it's a discipline now that has actually grown a lot. So a lot of Fortune 500 companies have a staff that does like strategic foresight. In a way, it's sort of like trend analysis. In a way, it goes deep on the social world and social change. Technological change plays a big part. Obviously, sprinkling in policy and things of that nature. What I like about it is sort of the research framework that is taught, that we had to learn. It puts a lot of emphasis on on things like weak signals, which is you come across some weird thing,

• 7:08Speaker 01

  you know, online and it could be anywhere. It could be a trashy blog. It could be, you know, some study that some great university just put out. It could be anything, but something that kind of jumps out as like really anomalous, you kind of put a pin in and start following for that to turn into something a little more, to go from weak signal to like a cluster of a little bit stronger signals. And that's when you can kind of see like, okay, we have something coming here and you can pay a lot more attention to it. For me, it's helped tremendously in finance to to view things this way, to try to see around corners in a way that, you know, traditional financial education, economic education is very, very bad at. I actually quit on an MBA program when they presented me a formula, like a

• 7:50Speaker 01

  true formula. This is how much, you know, this this equity price should be. And it's like, that's having been a practitioner and then being taught like this is the formula for the stock price. And I was like, that's not, that's not how this works. And I kind of argued with the professor and like, no, this is like how it works. Like, this is, this is like the truth, you know, like this is the tablet for how much this stock's worth. I'm like, that's, I can't do this anymore. I like, so I quit on the spot and I was trying to find a different degree program that was a little more outside the box. And foresight's very outside the box. A lot of creativity goes into it. It's interesting.

• 8:20Demetri Kofinas?

  Wait, dude, I have so many questions because we haven't talked about this before. So when did you get this degree in foresight?

• 8:24Speaker 01

  So I just finished my degree in May.

• 8:27Demetri Kofinas?

  Okay, how long is the degree? Was it a year, two years?

• 8:30Speaker 01

  So, yeah, I mean, you can easily do it in two years. I took my very sweet time doing one class at a time and took me like four or five years.

• 8:37Demetri Kofinas?

  Okay, so you took this, this is an online course?

• 8:39Speaker 01

  Yeah, University of Houston, which is where I actually went undergrad right before I went to the Air Force. But they have, they have it all online.

• 8:45Demetri Kofinas?

  So how many other universities offer a program like this? Is this a relatively new thing that's, or is it actually an old thing that some universities have?

• 8:54Speaker 01

  It's old. Not very many universities offer it. You can do, you can do this at the University of Hawaii, I know. And then there are a few schools in Europe. There's one in Australia that's pretty prominent.

• 9:06Demetri Kofinas?

  Now, what careers are usually tied, have you traditionally been tied to courses like this? Who, who are the other students that are taking this class?

• 9:14Speaker 01

  Yeah, a lot of them, a lot of them work very corporate roles where they kind of carve out their own little business to do like consulting type of work, do workshops and stuff like that. But a lot of this, if it goes back to like World War II era, Rand Corporation, they were kind of like the first people to like really do this. And then Chevron has had that like, or Exxon, I can't remember now, has sort of that like, had like a futures like operation. After I think the big oil embargo in the Middle East, like they were like, we gotta start thinking about stuff like this.

• 9:41Demetri Kofinas?

  This blows my mind. What are some of the core, so you said complex systems theory?

• 9:46Speaker 01

  Yep.

• 9:47Demetri Kofinas?

  Social change. Social change. So what is that exactly? Like, what does that entail? And who are you studying? Like, what are the most influential thinkers and works that you cover in the course? Actually, I should stop calling it a course. I keep calling it a class or a course, it's a degree.

• 10:02Speaker 01

  They do, I will say though, that they do have a certificate program that people can do like a little bit of it instead of all of it. But for social change, I mean, basically you think about a lot of the pillars of philosophy and, and psychology and stuff. It, it went into all that. But the, the big thing is to look for change, like trends socially that, you know, we, we even went through, uh, like every kind of cycle that you have ever heard of, like to include like fourth turning stuff, but like Kondradia, like you name it, like if it was a cycle, we studied that just so we all knew what those things were. But you know, a lot of like Freud and, and stuff like you name it.

• 10:39Demetri Kofinas?

  Wait, so now why is it important? But so the audience should know this is not, we didn't start this conversation with the intention of doing this, but actually this is so aligned with where I've been and even this, the ethos of the podcast from the very beginning that I have to dig into it a little bit. So just clarify something for me. How does thinking in cycles relate to foresight? Is it because there's a pre-existing pattern? And so you're kind of piggybacking off of some level of embedded predictability?

• 11:04Speaker 01

  Yeah, most people I think in foresight aren't, aren't sent back and using cycles. I think it was really a It's like another overlay that you can put on to, you know, a project you're working on essentially to think about.

• 11:15Demetri Kofinas?

  To create structure in what would otherwise appear to be noise.

• 11:18Speaker 01

  Exactly. So there's a lot of like mind mapping and stuff like that where you're, you know, we have these crazy flow charts and bubble charts that show like all the connections. And, you know, modern tools are pretty great for kind of building out the different connections between different themes and everything. It's where you can kind of start to see things emerge in a way that, you know, is difficult if you're just kind of spitballing.

• 11:41Demetri Kofinas?

  So like, let's go back to this other question I have with this and then we'll eventually tie this off and get into our larger discussion, which is about the electric stack and AI and the investment opportunities. And also the, uh, the larger macro implications of the US-China competition and why China, in your opinion, is winning this competition at the moment. I love this idea of learning how to find the signal amidst the noise and how to independently assess or evaluate truth claims without relying on authoritative sources of information. I mean, this is like the essence of what I do and what I've been trying to do on this podcast for years,

• 12:24Demetri Kofinas?

  which is to try and help people learn how to learn, how to learn what to pay attention to, what not to pay attention to, and how to constantly reevaluate and reformulate and iterate upon their pre-existing understandings of the world and build new frameworks that provide better explanations for the phenomena we encounter. And importantly, are more predictive of where the world is going, which I think is more important now than ever because there are fewer commonly agreed upon sources of authoritative truth. And because the consensus narratives that were so often stand-ins for truth have broken down in this

• 13:07Demetri Kofinas?

  new Wild West. I mean, this is like the, the Wild West of information and narratives in my view. So like, who were some of the important influences there in your coursework? Like, what were some of the philosophical disciplines that you guys relied on in order to sharpen your epistemic skills?

• 13:27Speaker 01

  Yeah, I mean, it's such a multidisciplinary, like, approach. And one of the things I liked was like, the different professors were very, very different. So like, some of them were very rigorous on sourcing, very rigorous in general. And some of them were like, like, so go with the flow on it. They would use any source if, if it helped in, in the process. I mean, it, it's hard to like nail, nail it down as like, you know, we had like a framework for the process that we all had to use because it was like the university's framework. But each professor had such a different way of doing things outside of that framework. So it's hard for me to like.

• 14:07Demetri Kofinas?

  Well, I'm not gonna, I'm not gonna, I'm not gonna torture here, Chase, because you have a gazillion things on your mind. The last thing you were prepared to do is talk about a university.

• 14:15Speaker 01

  No, I, I, I do really like talking about it because, especially to finance people, because finance people are so left brain dominated and they all want to go get, just go get the finance degree. And don't get me wrong, like, there's very left brain stuff involved here, obviously. But how deeply multidisciplinary is to, to the point of it being uncomfortable for a left brain person like myself, like, I, I took so much from it. Like, it helps me more in finance than like a CFA could ever hope to.

• 14:44Demetri Kofinas?

  Well, I wrote a, I've started writing a weekly newsletter and the first one publishes the day before this episode goes out and it's about the epistemic crisis, what I think is an epistemic crisis that we're facing and the absence of a movement to really address it. I mean, like, I don't know if you've seen, probably have, that there's been this explosion of interest, especially among young men on YouTube and fitness related content, bodybuilding, MMA, bio tracking and just general wellness and, and diet and stuff like that.

• 15:17Demetri Kofinas?

  And while I think that there are many reasons that explain it, especially among the younger demographic, one of the most obvious reasons is that people are concerned about their health and they want to do a better job taking care of their bodies.

• 15:32Demetri Kofinas?

  And the backdrop is the larger health crisis in America. And I think COVID and the rising levels of distrust in health authorities has contributed to that. But there hasn't been a commensurate movement to address the epistemic crisis that we're facing. And I feel like there's a real opportunity there to do that more deliberately. So you've piqued my curiosity, Chase. I'm gonna go interrogate some of these people at various universities to understand how they're approaching these problems and if there may be some synergies there. Because to my point about iterating on new frameworks, that's especially important to do during times of great change like we're seeing today,

• 16:13Demetri Kofinas?

  where your baseline assumptions about the world that inform your models may no longer hold, which explains why you keep getting all the right answers to all the wrong questions, as Russell Napier is fond of saying. So I do think there's a real opportunity here.

• 16:28Speaker 01

  Yeah, 100%. So we did a big project at the end, like me and a few other of my classmates, on the future of truth. And it was, it's really dystopian, like rabbit hole to go down, obviously. But to think about like, what does the truth look like in 2050, given, you know, the way AI is impacting our world, not to mention social media. And like, we had to develop like some sort of like digital canon that that most of us at least can agree on is like some fundamentals. Because I feel like that's one of the things we've lost sight of lately is it feels like the moorings of the canon of what's true. Even that has like, is like shaking, it's wobbling to a degree. And so we had tried to design a system where we could build

• 17:10Speaker 01

  an agreed upon canon in a digital age of some fundamental, like we can all at least come back home to this stuff.

• 17:17Demetri Kofinas?

  Yeah, and I think also just this is, we are now living during a time where philosophical questions about the nature of truth and how do we know what we know and what is true? And how do we assess truth have never been more important? Because if there isn't some authority that everyone agrees on as being the authoritative source of truth. Then we all have to be able to arrive at truth on our own. And then we have to be able to interrogate what that even means. Like, is there such a thing as objective truth? Where does truth derive from? So, I mean, that's, anyway, that's, this is for, you know, multiple episodes, which I should actually, I feel like I've done, you know, this a long time ago in different ways, but not with this intention.

• 17:59Demetri Kofinas?

  So let's get into the reason that you came on the podcast today, Chase, which has to do with the AI capex boom, the much talked about AI capex boom that you've also been writing about, and the urgent challenge facing the United States to reignite this flywheel of domestic manufacturing, and importantly, manufacturing-driven innovation that you and others believe will depend critically on yet another capex boom in electricity production, storage, delivery, pretty much everything else that goes into the electric stack, as I've heard some people call it. And these are two complementary conversations, a conversation about AI and about electrification, because the electricity needed to power AI is only going to grow,

• 18:43Demetri Kofinas?

  even if novel architectures and new software implementations will be more important than previously thought to scaling these systems. Because regardless, the demand for electricity is still going to be a proxy for AI demand. So, why don't you just walk me through what got you interested in these topics? And why you think they are so important, both for the economy and also because of their implications for investors?

• 19:10Speaker 01

  Yeah, so I started off writing that piece really to just go deep on the electricity part in the US, because clearly we have challenges creating enough electricity, and maybe more to the point for now politically, to create it at a price that makes sense for regular people, that the economy can use. And one of the things that kind of piqued my curiosity, I was thinking about the shale revolution, and how much that's done for the US in the last, you know, decade that, at this point, we all just take for granted, right? Like, having cheap natural gas. Is very, very helpful for for us in our macro perspective and for just the economy in general. So to have really cheap natural gas, maybe like ending, like I'm not saying

• 19:54Speaker 01

  the shale is peaking imminently or anything, but at some point, that gets a little bit harder. You've kind of high graded all your good stuff. And I just assume, you know, maybe it's 10 years from now, maybe it's a year from now, like it just gets a little more expensive to get this stuff out of the ground. And that becomes a macro headwind. It becomes an electricity headwind, especially as we, you know, are strong harming people into taking our LNG exports while perhaps needing more of that for ourself in the future. So like, I was thinking of it from that perspective of maybe, maybe the shale revolution goes from a big tailwind for us to a potential headwind, growth, inflation, all of it. So I was just doing a ton of research on all these kinds of things. And I just happened to stumble on an article, I shouldn't call it an article, it's basically a book called

• 20:38Speaker 01

  The Electric Slide by Paddy McCormick. And oh, man, I'm forgetting the other guy's name now. I think it's Rob DiAmico. And that whole thing just blew my mind. It's a 213 page PDF of an article, but they go deep on a bunch of history and tech, you know, technical stuff that I think is worth people's time, but you know, you can skip some of that and get to the heart of it easily. But essentially, the view that they present here is one I hadn't really considered, and to me was a complete game changer. And that it's basically, you know, the cost of electricity in China right now is, is about half of what it is here. They're producing about twice as much as we do. And in addition to that, they're dominating us in storage and solar and things like that. And I think five, 10

• 21:23Speaker 01

  years ago, any investor seriously looked at renewables versus fossil fuels. It was kind of like, what are we doing here? Like, this stuff's really expensive. It's kind of less efficient. It's available less. Like, the whole thing just kind of didn't make sense. And the same for a lot of downstream. You know, products that would use a battery like, ah, it's too expensive, it's too heavy, whatever the case may be. But they do a really good job of illustrating the cost curves of not just batteries, but of those electric motors, of the compute, you know, the whole part of the stack, like, all that stuff got way, way cheaper. And it, I think they go back to 1990. And if you take the whole electric stack, it has gone down by 99%.

• 22:07Speaker 01

  And it's basically like an annualized 12.5%, something like that. And to be clear for people, the, the electric stack, it's lithium ion batteries, which is, you know, how you store and supply the power, magnets and electric motors, turning electricity into mechanical motion, power electronics, which is used to shape electricity into very precise forms that all of our modern technology needs. And then all the embedded compute, which is, you know, orchestrates all of the how and why and the action of that stuff. All of that got radically cheaper. And all of a sudden, the stuff is, is so affordable that using it in modern products makes a ton of sense. I think one of the things that should stand out to people and, and people should ask more

• 22:49Speaker 01

  questions about is like, how did China go from a, a car backwater to dominating, you know, global auto exports all of a sudden? They make the best and cheapest EVs in the world. And it, I feel like not very many people have asked the questions of like, how did they get there? And this kind of whole thesis does a lot to kind of make that make sense. It's, well, they got really good at batteries. They got really good at making batteries cheap. And then the same thing for all these like power electronics and electric motors. And not, are they just the best at manufacturing these things? They're starting to take the lead in new designs of them. They own the supply chains upstream of them. And then they're all like, you know, co-located and working together. These supply chains are really tight.

• 23:33Speaker 01

  It's not like a giant global supply chain in the way that a lot of these are. And there's base layers of this technology. They're kind of the same for cars and like appliances and lawn equipment, like buses, like you, you can just kind of like run through a lot of different things. And it's like, well, okay, well, it needs a lithium ion battery. It needs some electric motors to move it. Like they use the same things, like. You think back to like when we were kids, like, you know, a car and maybe a forklift and

• 24:03Demetri Kofinas?

  A lawnmower, lawnmowers mostly used to be gas powered and probably still are.

• 24:08Speaker 01

  Yeah. And all those things were so different to design and manufacture. Now, if you're really good at building one of these things, you look over at the other one, you're like, oh, we can do that. And a good illustration of this is you have phone companies in China like Xiaomi, like going from making phones to making really good cars and they did that quickly. And I don't think people have made it click in their head that, well, yeah, that's because like they understand this electric stack so well, and it's really just reconfiguring the same parts in a new way to make a car, like it's not that complicated. So as we sit here today, we are not particularly good at doing any of this, even though most of this stuff was our idea, you know, 20, 30 years ago, 40 years ago.

• 24:50Speaker 01

  And because these things work together so well, like the article, and I expound on this in my piece, but thinking of each of these different parts of the stack, and even in my opinion, up the supply chain is like Legos that snap together, like every time two of these Legos snap together, they create value, like it's two plus two equals 10 every time. So that's why like you look at a BYD and they're making iPads and drones and cars and buses and forklifts and trains and they make all this stuff and they make it really well and they make it at a a really, really good price. And I did a Q and A for the Genius Community with you, and I, I think the word I use probably 50 times is competitive. Because my big concern with the tariff wall, it's like that makes you uncompetitive.

• 25:35Speaker 01

  So I have competitiveness like on my mind as we navigate the whole manufacturing thing. Cause clearly this shows to me that we need to do more manufacturing at home, but the right kind of manufacturing and doing it in a way that keeps us competitive, I think is crucial.

• 25:54Demetri Kofinas?

  So I feel like this conversation, to the extent that it's happened in the US in recent years, let's say post-COVID especially. Has been, besides the fact that it's been heavily politicized, it's also focused a lot on the electrification of cars. And whether electric motors are better than internal combustion engines, whether there's enough range, et cetera. So much of the critique has really been a critique of electric vehicles and intermittent sources of energy like wind and solar. And what it sounds like you're saying is that the downstream consequences of becoming really good at electrification, at harnessing new renewable sources of energy,

• 26:37Demetri Kofinas?

  in battery technology and in magnets and electric motors that turn electricity into motion and generate force, create positive flywheel effects that begin to encompass and influence more and more areas of the economy and the creation, manufacturing and design of products that would not have been thought possible otherwise. And that's not really how we've been having this conversation in America. We've been having this conversation in much more isolated terms. And our support of these industries has largely been seen as a concession to people concerned with climate change or as necessary but economically inefficient responses to an exogenous problem, namely carbon emissions.

• 27:20Demetri Kofinas?

  Whereas in China, their perspective seems to be very different. This is not only good for reducing carbon emissions long term, but it's also economically savvy. And they've taken a mission critical approach to owning this space and as much of the supply chain as possible and as many of the downstream innovations that come out of it.

• 27:40Speaker 01

  Yeah, exactly. So you think of this as like energy, intelligence and action. They're kind of all in on energy and action. Obviously, we're sort of all in on the intelligence side. We both do AI, they just do it different. And I think they're doing it with that applied focus on how it can touch all these things. And to that point, like, the reason this is important is because more and more things make economic sense to be electrified or have a battery in it than some form of combustion. You mentioned like lawnmowers, perfect example. Like, the best electric lawnmower now is pretty incredible. It's so much easier to deal with. I think one of the hard things for us in the US is like, we, we just politicized electricity and means of, you know, powering a vehicle. Like, that became like everything, it seems like,

• 28:23Speaker 01

  two camps, two tribes that had to take sides, like. And I think a lot of people took the side of like, oh, okay, well, all this renewable stuff's bad and EVs are dumb. And they just left it there. And I don't think that was a crazy position 10 years ago. But because of the cost curves rapidly declining, now all of a sudden, okay, well, let's take another look. It's like, well, this stuff's cheap. This stuff is effective. And now the batteries are as cheap as they are, like even storing grid power has become a big deal. And I think that's going to even even like you look at a home generator, like, still to this day, a lot of people have a diesel one or one that runs on gas or whatever. I think 30 years from now, no one will have that. You'll just have a home battery, like, and those are already starting to get big

• 29:07Speaker 01

  and they sell power back to the grid. There's a whole business model around that.

• 29:10Demetri Kofinas?

  And the efficiency on those is improving at a faster rate than than solar, for example.

• 29:15Speaker 01

  Yeah, big time. And even talking about the range anxiety, which all those kinds of things, like you look at the most cutting edge batteries coming out of China right now, the range is pretty great.

• 29:24Demetri Kofinas?

  And you can also repurpose those when they're plugged into your house, you can repurpose those and turn those into generators, right? So like, the thing that's really interesting about this suite of technologies is that it's more malleable. In some sense, it's almost kind of like the revolution that's happening with screens and software, where we used to have purpose built analog things. And then increasingly, everything became software. There's something, I think, similar here, where there's like, there's much more commonality and interconnectivity between parts of the stack on the electric side than there is in the traditional internal combustion world.

• 29:59Speaker 01

  A hundred percent. And like, going back to the phone car thing, like, the first Tesla batteries for their car was basically just a bunch of cell phone batteries, like, truly, like, like, that's where a lot of this stuff came from, like, the early batteries were, I mean, they were bad, but here we are, like, now you have the BYD Blade battery and. And if you look to go back to weak signals, if you look through a lot of scientific journals and so things people are playing with on the cutting edge, it looks like that you have a reasonable promise of these batteries being significantly better. You know, 20 years from now, when some of this stuff gets applied, I just did a research piece on aluminum. And there's like an aluminum battery that is completely outperforming lithium.

• 30:40Speaker 01

  Now, it's super early, you're talking like basic research level stuff, not it's not going to be commercialized tomorrow. But you know, all this stuff we're talking about was in somebody's head in the eighties and nineties. You know, it got it just that China just really commercialized it in the last decade.

• 30:56Demetri Kofinas?

  Where do you feel like we went wrong or have gone wrong here?

• 30:59Speaker 01

  Yeah, so I credit that piece for what I'm about to say, because I hadn't thought of it in this in this way well enough until I read it, but and that's the electric slide. But essentially, you know, profits at the end of the day have driven us to go all the way up the perceived value chain to just like, let's do software and let's design things like chips. Like, we'll let them build it, we don't need to build it. That's like, you know, a low value added thing, we'll design it, that's where all the profit margins are. And on the surface, that makes perfect sense. But I think over the long run, it makes no sense, because at the end of the day, you cannot separate design and manufacturing. That's I think that is the core mistake we made was we can separate it.

• 31:41Speaker 01

  We can have an engineer in Palo Alto tell the factory floor in Shenzhen or whatever, like, here's how to do it. Because as you iterate manufacturing things, you come up with ideas that impact design and designers come up with ideas that impact manufacturing. The reality is you need them working literally together. That's something I think Elon Musk is one of the few people in America that he gets that. He has his design and engineering people basically right at each other at all times, because so often someone designs something stupid from an engineering perspective, or you know, the engineering team wants to do something that negates the whole point of the design, right? I think we missed out on the fact that a lot of innovation can come from manufacturing. And if you go back to Apple and China, the interview you did on that, this really exploded to me because

• 32:27Speaker 01

  if you remember, he highlighted the point where Foxconn turned around with a iPod that they made themselves and presented that to Apple. And Apple was blown away at how good it was. And that was like a perfect example of like, here's your manufacturer that they're not allowed to design stuff. But here they've come up with a product that's actually really good. And it's because they've learned so much doing that manufacturing work. You know, that kind of stuff should have triggered people to be like, wait a second. Are we missing out on some of the future of design because we're not doing the manufacturing? And I, I think that answer is just yes.

• 33:01Demetri Kofinas?

  Yeah. What was also amazing about that interview and the book is that you realize even China's leaders didn't understand that, that in fact, Apple was instrumental in explaining to them how valuable their participation within the Chinese economy had been to sparking this flywheel of innovation driven by hands-on, you know, iterative manufacturing. And like the fact that you're doing that thing makes you better at the other thing or lots of other things.

• 33:31Speaker 01

  Yeah. And if you're the manufacturer for this whole stack and you're talking to each other, like talking, you know, that flywheel, like you, again, like two plus two equals 10. And the more you combine these things, and I, another point I'll make is if you study the greatest business leaders, the industrial titans of history, almost all of them used pretty intense vertical integration. You think of Rockefeller. He did not just make oil and kerosene or whatever. Like he was doing, you know, the barrels and the transportation. Like he wanted all of it. And that made him very, very efficient, but really drives down costs. It gives him, you know, more control over the whole process. And I think, you know, globalization in the modern world, like we undid a lot of that. And for not all bad reasons, that makes plenty of sense. Like, but now I think we see the reemergence of that kind of work

• 34:16Speaker 01

  for like the BYDs of the world where they're controlling the whole thing and that's helping them drive down costs. Again, it goes back to competitiveness. Like you're more competitive, you do that.

• 34:25Demetri Kofinas?

  You have more leverage over yourself. Suppliers.

• 34:27Speaker 01

  Oh, big time. Right. Yeah. And, you know, there's that horizontal integration too of like the multidisciplinary thing, like taking innovation and all these different adjacent fields and applying it to yours like, you know, a Lego, you know, in this other industry hasn't fit in your Lego ever, but now all of a sudden it snaps in and it's like, oh, wow, we can do that. Okay. Think about drones, like drones wouldn't exist if we hadn't had some of the innovation we've had with with electric motors and making them more lightweight and batteries more lightweight.

• 34:58Demetri Kofinas?

  Now, going back to your, to the conversation we had at the beginning about foresight, doesn't it also make you better at predicting where things are going?

• 35:07Speaker 01

  Yes.

• 35:07Demetri Kofinas?

  Because you can see so many of the different applications for the products that you're creating.

• 35:12Speaker 01

  Exactly. And that system thinking approach of, of realizing that things are not just the sum of their parts, like the way they interact with each other, the feedback loops makes it much more like there's a, a compounding effect just inherently built into some of this stuff. We're talking about the future, like we're talking about where the world is in 20 years, who gets to build that world? And at the moment, the way we have this structured, like it's not us, like we are, the US will be like an emerging market being like, you guys want some soybeans and some natural gas and like, I don't know, that's what we have, you know?

• 35:42Demetri Kofinas?

  So it feels like we, you know, I sent you a clip yesterday from that movie, The Counselor. There's this scene where this guy is speaking to someone else and the, and the conversation is essentially around like acceptance. And one of the people, the counselor, hasn't really accepted the predicament he's in. He's still in a state of denial and wanting to be able to go back in time and change things in the past and that not being possible. And I feel like we remain in a state of denial here in America today, and we haven't even entered the race yet. That's what it feels like. And I'm curious if you agree with that. And if you do, I don't necessarily want to try to understand why that's the case, but I am curious to know what you think needs to happen.

• 36:25Demetri Kofinas?

  And maybe if you've identified people or companies or actors within or departments within the government that are actually trying or making progress or putting forward positive visions for what we need to do in order to become competitive again in these areas as a country.

• 36:40Speaker 01

  Yeah, that clip really nails it. It is an acceptance problem. And I don't even think people like even realize this yet. Because again, like we tend to see the individual Legos and think about what got us here more than like where we need to be in 20, 30 years. It's just like a giant blind spot. Like, obviously, we have gotten around to realizing rare earths, right? In the last year. That's been kind of obvious for 25 years, something like that. I don't know, like that you need to be careful with that at least. But we didn't really grasp it until like the mousetrap like snapped on us this year. And it's like, oh, like, maybe we should do something about it. So the odds of us doing something about the rest of this, especially because a lot of these things are politicized in America, it makes it tough. But to me, as far as like, okay, what do you do about it?

• 37:25Speaker 01

  First of all, you accept it. You realize where exactly where you're at. You know, you have to figure out what's important and like electricity is important.

• 37:32Demetri Kofinas?

  And I feel like we're in that, just to quickly to interrupt you and then please continue. It feels like we are in that process right now. When people like Patrick Mickey or Dan Wang publish their books or Kyle Chan, you know, publishes his letters on Substack and more and more people read them and share them. It feels like that is part of a process of, let's say, the top 1% or 10% of intellects in the United States who are beginning to realize like where things are. And then that message will eventually sort of, you know, resonate throughout the economy and then we get acceptance. But it feels like that's where we are. We're still in the process of reaching acceptance.

• 38:05Speaker 01

  Yeah, exactly. I think those people, it's kind of like the weak signal that like, okay, some people are actually starting to figure this stuff out. It's just the road to get there becomes the hard part. And one thing I've noticed, maybe it's just my opinion, but we keep trying to slap Band-Aids on everything and look for really easy fixes. So.

• 38:22Demetri Kofinas?

  And easy sources to blame. That's another quick one that, you know, that we are still in a blame mindset in America, which is also very amenable to what's in the incentives of politicians. And we need to move past the sort of who's to blame, pointing fingers to actually, what are we going to do about it?

• 38:37Speaker 01

  Exactly. Solve this, like, let's work on solving the problems instead of sharing the blame. And whenever it comes to China, like. Everything is so defensive from our perspective, even the language, you know, decouple, de-risk, contain, it's all so back-footed. Instead of being like, they're doing a really good job of competing with us now. And we can debate how much of it was fair or whatever, but at the end of the day, they're out competing us in a lot of really important areas. And it just gets worse in the future, in my opinion, based on what we're doing now. So the whole like, how do you fix it thing? To me, it absolutely fundamentally starts with education. That, that is where the biggest erosion has happened, in my opinion. That's what has to be the number one priority. Like, as I write in that letter, like, all this stuff's about human capital.

• 39:22Speaker 01

  Like, and I don't care how good your policy is if you don't have the human capital, if you don't have the engineers that can build the things, think up the things. If you don't have robust, well-funded university labs, government labs, corporate R and D, like, most corporates, they don't love doing R and D these days because, well, that hurts the bottom line. Like, that's where everything has to come from, is these institutions. And when I was a program manager in the government, I got to spend time at like, with MIT rocket scientists and I worked at the, the Air Force's rocket laboratory. So you're just, you know, huge nerds thinking about what a satellite thruster needs to look like in 25 years. Like, so seeing like the yield that stuff generates when people are just given money and time to tinker and think about hard problems.

• 40:06Speaker 01

  And, and that's what gave us that giant lead. That's why we are the ones that thought up most of these, these actual things that are, you know, being commercialized in China. So for me, it all comes down to that. But a hardware focus over just software is huge. I think we've had a very myopic focus on software that needs to make a dramatic shift to hardware. And when I think of like the Palmer Luckys out there, like, that we need more Palmer Luckys is the first thing I would say. A non-bloated entrenched defense contractor that's, that's trying to, to build physical hardware at a decent price. And I give Elon credit, same thing for SpaceX, right? Like, made things, taking things in this space a lot more competitive because of some innovation.

• 40:53Demetri Kofinas?

  You know, I really do wonder what the opinion, perspective, view is from Beijing when they look at us today, going through this government shutdown period, where we haven't even entered the race yet. And I just, I wonder like, what they think, you know, like, what are they thinking is happening here? Because I can't even really fully understand. I think, I do think part of, I think you really nailed it when you talk about decoupling, de-risking, containing. That speaks to a scarcity mindset, a mindset of like, we accomplished XYZ, that's as good as it gets. We got to hold on to what we have, because if we lose it, that's it. That's kind of the mentality of inheritors of wealth. It's like, this is

• 41:36Demetri Kofinas?

  all I'm gonna get. I don't know how to make any more of it, so I gotta try to protect it. And I think that this also is reflective of a state of privilege and comfort, that's not consistent with what made us a great power, and a great country, and a global leader to begin with. And it's why a lot of the conversations, in my opinion, around reshoring iPhone manufacturing in Texas, feel like fantasy talk at the moment. Because doing that requires sacrifice. And we just haven't gotten to a place in America yet where the incentives are there to do that.

• 42:13Speaker 01

  Yeah, I hadn't thought of it from like, a individual family's wealth perspective, but it's a perfect analogy, honestly. Like, I say in that letter that China takes serious education way more seriously. And I think that shows that there's a work ethic gap, for sure. To go back to Apple in China, when it talks about the, they needed a factory floor, like, cleared out or whatever, and they thought like, oh yeah, I'm sure they'll have it done in two weeks. And they came back the next morning, and it was just like, all done. And like, those, the executives were like, mind blown. I think there's just like, a

• 42:42Demetri Kofinas?

  There's a hunger.

• 42:43Speaker 01

  Yeah, a hundred percent.

• 42:46Speaker 01

  You know, the average macro investor, the one thing you can guarantee they'll smash China for is that they're, they don't let consumption grow significantly. And I'm not saying this is all good by any means, but there is this like forced hunger that comes top down. Like, they don't let people get very comfortable. They don't let people stop working hard. They don't want rampant consumerism and, you know, things that probably do have, you know, contribute to us getting a little bit lazy. But at the end of the day, like, this is just human nature. Like, you get a bunch of stuff, you don't keep the same edge you had. It's like, it's why coaches and sports struggle really hard to keep their teams up against bad opponents and stuff. So I think that's just part of it. The question is, you know, how to get back out of it.

• 43:30Demetri Kofinas?

  And they're very explicit about it. Xi Jinping talks about this when he uses the phrase eating bitterness. And I encourage people to read Joseph Tariqian's book, which is a history of the Chinese Communist Party through the life of, told through the life and times of Xi Jinping's father, to really see what, you know, what is the environment that produced these people? What is their history? And, you know, the other thing I think about is that, in some sense, we're kind of following the Europeans. Europe was the dominant continent until the end of World War II. It was the source of the first industrial revolution. It produced so much literature and culture. And eventually, America took over. But because of the Cold War and the threat of the Soviet Union, the United States

• 44:13Demetri Kofinas?

  was incentivized to help bring Europe along for the ride. And so like, at the end of the day, Europe lost its empire, or the Brits lost their empire, and other countries in Europe lost their influence, their political influence globally. But they gained in terms of lifestyle, because they were able to benefit from alliance with the United States. We're not in a similar position today, so we can't afford to just kind of go quietly into that good night. And I, again, I find it concerning that we haven't, we're still in this place of culture wars and fighting between ourselves, and shutting down the government, and looting the government, and all this stuff. It's an absolutely terrifying place.

• 44:56Demetri Kofinas?

  And I haven't seen a movement within, on either side, really. I mean, there are, there are elements of people, both on the left and right, but the politicians on both sides still seem to be playing that game. And the people that have money and have done well in the United States, again, to speak to incentives, you know, they may want to see positive change for the country, but they're only willing to risk so much, right? Because they don't want to expose themselves to losing what they have. You can even see this in, when it comes to like housing developments, like, right? Like, in wealthy areas, people don't want new housing because they don't want to affect the value of their own homes, even if other people need houses and they can't afford them. And all that is undermining the political consensus in the country. Chase, let's, you know, you write quite a bit about AI.

• 45:41Demetri Kofinas?

  I want to talk about that too, because one of the sort of operative questions that are, is in people's heads these days is whether we're in an AI bubble, or an AI capex bubble. And that's something you've written about, I want to talk about. I also want to talk about the dollar, because there are some indicators that we might be heading into a growth slowdown. And the question that I have in my mind is, are the same dynamics going to hold this time around that have held in previous recessions because of the role of the US as the primary consumer of the world's surplus? And because of the dollar's role and the role of US government debt internationally as a place of refuge for investors and businesses looking for safe havens to park their cash? Or are we going to see a post-liberation day dynamic, where the dollar behaves more

• 46:26Demetri Kofinas?

  like an emerging market currency and sells off in the face of economic weakness? And to the extent that we have time, Chase, I'd love to talk about Venezuela and what US policy is there and how it fits into some of this talk about bolstering the Monroe Doctrine and America's own retrenchment into the Western Hemisphere. There's something that we've talked about in the comments section of some of our posts in the Genius community, and it's something that I know you've thought quite a bit about. For anyone new to the program, Hidden Forces is listener-supported. We don't accept advertisers or commercial sponsors. The entire show is funded from top to bottom by listeners like you. If you want access to the second hour of today's conversation

• 47:09Demetri Kofinas?

  with Chase, head over to hiddenforces.io/subscribe and sign up to one of our three content tiers. All subscribers gain access to our premium feed, which you can use to listen to the rest of today's conversation on your mobile device, using your favorite podcast app, just like you're listening to this episode right now. Chase, stick around. We're going to move the rest of our conversation onto the premium feed.

• 47:33Speaker 01

  Sounds good.

• 47:35Demetri Kofinas?

  If you want to listen in on the rest of today's conversation, head over to hiddenforces.io/subscribe and join our premium feed. If you want to join in on the conversation and become a member of the Hidden Forces Genius Community, you can also do that through our subscriber page. Today's episode was produced by me and edited by Stylianos Nicolaou. For more episodes, you can check out our website at hiddenforces.io. You can follow me on Twitter at Kofinas, and you can email me at [email protected]. As always, thanks for listening. We'll see you next time.