Pillars of Power
Technology, Energy, & Money
AquaVis believes the major adaptable building blocks of geostrategic Power are Technology, Energy, and Money.
Technology
Innovation to more efficiently create/extract/convert/transform/store Energy and/or save Time
Energy
Base input into any system
Money
Money (or Capital) as stored Energy (Dimensions of Labor/Energy and Time)
These three critical building blocks of Power are at an inflection point in history that will usher in significant change and shape the world for decades to come. Given each pillar's geostrategic importance, all of these evolutions and revolutions are taking place in a compressed time period – and change has shifted from a want to a must, exemplified by a recent National Security Strategy update. We believe we are at the confluence of the Fourth Turning, the end of a Long-Term Debt Cycle, and the ~beginning of a New World Order. With significant change and disruption, comes great opportunity.
Global System Backdrop:
Rising geopolitical tensions and global power struggle (see Peter Zeihan’s The End of the World is Just the Beginning)
Unipolar world moving toward multipolar world
Efficient supply chains moving toward resilient
Aging demographics and wealth inequality (see Neil Howe’s The Fourth Turning is Here)
Overleveraged Sovereign Governments (see Ray Dalio’s Principles for Navigating Big Debt Crises)
Challenges to the current Order and Empire (see David Murrin’s Life Cycle of Empires)
The Confluence of the above typically leads to:
Rising labor and capital costs
Rising energy and inflation costs
Rising taxes
Rising populism
Rising conflicts
Which Ultimately Forces an Acceleration in:
Technology investment and innovation
Energy investment and innovation
Money printing and innovation
Overall, there is clearly imbalance within the system. After decades of Order (suppressed Entropy), we are beginning to see Disorder (rising Entropy). As is typical within Fourth Turnings, crisis and conflict often arise and drive an ultimate surge in peak disorder. As with any Natural system (constantly seeking balance), out of disorder comes order: a new system emerges. The rules of the new system are typically governed by those with the most subsequent Power – which we analyze via the aforementioned Pillars.
Technology
For the Technology layer for this cycle, we are primarily focused on Artificial Intelligence (AI) – which is simplistically decomposed into Compute, Data, and Algorithms. Semiconductors are the base layer of the Compute engine – the ‘oil’ of Compute. Data is the critical input into Algorithms – the ‘oil’ of Algorithms. The Confluence of the three effectively composes AI – which will be the foundation layer to build on for the next decade+. AI allows you to more efficiently transform untapped data (energy) into actionable intelligence (value), to save you time and energy. As each Technology layer builds upon the last, the networks continue to get denser and accelerations of exponential growth opportunities arise – nonlinear growth is difficult for linear minds to fathom. The applications and use cases of AI will be innumerable and will become clearer as we progress through each phase. Overall, Technology is (or should be) always attempting to create abundance and non-zero sum outcomes.
“While technology development has always been a critical defining force and while it is well known that whoever wins the technology war wins the economic, geopolitical, and military wars, this has never been truer than now, and China and the US are the leaders and big adversaries.”
Energy
For the Energy layer, we are focused on both next-generation energy sources and storage, as well as all of the building blocks that got us here. To power Technology, society, and life in general, you need Energy. The most powerful Nations are energy independent, have access to the lowest cost energy resources, and have abundant supply of these energy resources. On the supply slide, consistent baseload energy is critical, with nuclear as a current optimal source. Further, we constantly evaluate frontier technologies – notably, new ways to more efficiently capture, convert, and/or store cosmic energy. The demands for Energy continue to rise, with a notable increase in the West from reshoring, electrification, and AI. And, as Jevons Paradox highlights, as certain resources become cheaper we end up using more of them – seen with many forms of Energy, from oil to data.
Money
The Money layer refers primarily to the sustainable storage of Energy (Time/Labor transformed into Capital/Money), as well as its liquid exchange (i.e., commerce). Often overlooked, as many (notably in the US) fail to ever assess the ‘water in which they are swimming,’ Money is of critical importance as it relates to Power within a system. The monetary system is generally broken down into the price of Money (interest rates), the quantity of Money (absolute ‘liquidity’; often M2 as proxy), and the exchange rate (with most assets quoted in USD terms today). As an example, the US has a unique ability to print the currency in which it spends and owes debts – the USD system is one of America’s greatest sources of Power. We evaluate both the current centralized systems (i.e., Federal Reserve setting the price of money, Treasury and Banks primarily determining supply), as well as the emerging ~decentralized systems – notably blockchain-based systems like Bitcoin. We believe blockchain will be a critical underlying technology at the foundation of future systems. The Cascade strategy is specifically focused on this Money layer (leveraging Technology/AI as a tool).
The confluence of leadership in the three pillars above creates Power. Energy is the basis of any system; Technology seeks to make Energy more abundant/efficient; Money stores Energy across Time. They are interconnected pillars with each reinforcing the others. The above descriptions are not exhaustive – we will post a separate, longer piece that delves deeper into the Confluence strategy and related backdrop.
We seek to understand each pillar via the basic building blocks of Energy, Time and resulting Value — so we will often use these terms across and within systems. For example, viewing both data and oil as forms of potential energy. We try to avoid getting into the typically fruitless semantics of any specific word or concept, but rather focus on the intention and essence. We highly value clear, concise language.
Further, these three pillars of Power are all interrelated and inextricably woven together – for example, you need Energy to power data centers to run compute to transform data into actionable information… and leadership in AI powered by cheap Energy gives more Power and legitimacy to your Money system. Just as each tributary flows into the increasingly larger and more powerful river (confluence), each Energy source and Technology builds upon the prior foundation, ultimately creating denser networks – for example, the Internet built upon prior base infrastructure (e.g., telco/optical) which reduced the energy/time and cost to transport data. Time, Energy (Labor/Capital), and resultant Value are all fundamental building blocks that are interwoven across all and within each. The concept of ‘economic activity (or any activity) as energy transformed’ and/or ‘energy as the base layer of money’ are useful thought exercises… We will explore these concepts, the broader system (as it relates to all strategies), and more in future Whitepapers.