2026-01-13 15:52:45
Trump claims that the abduction of Maduro is all about the oil: capturing it for US use, while keeping competitors from its benefits. But how realistic is it? This depends on how much oil can be extracted from Venezuela. Today, it’s ~1.1M barrels per day.
A barrel of oil is currently worth about $60:
But Venezuela’s oil is worse quality than most, so it sells for cheaper, ~$8 less as of today, or $52.1 Let’s assume that continues.
But how much does it cost to extract a barrel of Orinoco oil and transport it and treat it to be sellable?
So of these $52, about $23 are hard costs, and each barrel yields around $29 in profit.
For 1.1M barrels per day, that’s ~$32M per day, or ~$11.7B per year. That’s how much money Venezuela could earn from its oil.
Compare this to the current situation in the country:
The Venezuelan government’s last budget asked for ~$20B, or almost twice the revenue that can be obtained from oil production.2
Venezuela owes ~$200B, or nearly 20 years worth of production!
ConocoPhillips alone is owed $12B, about a year’s worth of all of Venezuela’s oil revenue!
So either the US makes no money from Venezuela, or it plunders the oil and leaves Venezuelans to starve and die—won’t happen—, or it invests to decrease costs and increase production.
Now, decreasing costs is very hard because, as we saw in the previous article, the oil is superheavy. As Nigel Harris said in this comment:
In Saudi Arabia, all you have to do to extract the oil is drill a well, and control the resulting flow of oil and gas, which comes bursting out of the ground under its own geological pressure. Let the oil sit in a tank for a short while, and the gases bubble off (and are captured for use as fuels) and the water and sand settle out. The oil is ready to transport by pipeline and ship, and is of a quality readily handled by almost any fuel refinery in the world.
The oil [in the Orinoco Valley] is extremely dense (heavier than water), extremely viscous (like pitch or molasses) and extremely dirty (over 5% sulfur and masses of metals like vanadium). The only deposit like this elsewhere in the world is Canada’s Athabasca oil sands.
To extract the oil, you have to first pump large amounts of steam into the formation, to melt the hydrocarbons, then use electrical pumps at the surface or in the bottom of the well, up to a kilometer deep, to lift it to the surface. Once there, the “oil” is far too viscous to transport by pipeline or ship, and far too heavy and dirty for most refineries to tackle. So it is diluted by mixing with a much lighter crude oil, or the “condensate” liquids from a gas field, or refined naphtha (a solvent which you can buy as “white spirit” in UK DIY stores). The resulting diluted crude oil (DCO) is exported as Merey blend. This is still one of the heaviest, dirtiest crude oils in the world (16 API, 3.5% sulfur, high acidity and metals content), but it flows just well enough to be transported if kept warm, and some of the world’s more complex refineries can handle it, and make transport fuels from it, although usually alongside other lighter crudes.
So the only way to increase Venezuela’s oil revenue is by producing more crude. The problem with that is the investment required is massive.
The two best estimates suggest it would take tens of billions to maintain the existing infrastructure, and tens of billions more to go beyond that.
Why? Because we would need to build more refining capacity, more export terminals, more tankers, more oil pipelines, more electricity generation to power the steam to dilute the heavy oil… The investments for final refining would certainly happen on US soil, but all the rest would have to happen in Venezuela.
In the graph showing the cost of a barrel of oil, we had sections for Finding & Development and Cost of Capital. That is what would normally cover these costs. But that’s $12 per barrel today, so adding 1M barrels per day would only pay for ~$4B per year. Not enough to cover the tens of billions of upfront investment needed. So the margin that the government keeps after all this investment would shrink.
That’s assuming oil companies want to do this. But why would they? They’ve been stripped of their Venezuelan investments not once, but twice!
That’s why Trump met with oil executives a few days ago to get commitments to invest $100B into Venezuelan oil, and why the executives answered lukewarmly.
We have had our assets seized there twice and so you can imagine to re-enter a third time would require some pretty significant changes from what we’ve historically seen and what is currently the state. Today, it’s uninvestable.—ExxonMobil CEO Darren Woods.
For these companies to invest that money, they would need assurances that they will be able to pump oil for decades without their investments being nationalized again.3
Which means that this is only going to happen if the US can guarantee the rights of US oil companies in Venezuela for the next few decades…
2026-01-10 22:30:08
Ten or twenty years from now, you will see, oil will bring us ruin.—Juan Pablo Pérez Alfonzo, Venezuelan minister primarily responsible for the creation of OPEC (along with Saudi Arabian minister Abdullah Tariki), 1976
The world is in shock after the US took Venezuela’s leader Maduro, and the takes keep piling up, but they each focus on a tree rather than the forest. Why? What does it all mean? What will happen with Venezuela and the Venezuelans? Was this a legal or legitimate action? How does that affect the US, Russia, and China? How does it rewrite the rules of the world?
At the heart of all these questions is one thing: oil. So today, we’re going to look at Venezuela’s economy, why it’s mostly centered around oil, and why it has caused the situation we’re in. In the next article, we’re going to look at the ramifications.
When Chávez took power in 1999, Venezuela was one of the richest countries in Latin America.
Now, it’s among the poorest.
This is, of course, due to oil. Venezuela used to produce a lot, and now it doesn’t.
It was among the biggest producers in the world, and look at it now:
And Venezuela is extremely dependent on oil. In 2023, over 80% of its exports were oil and its derivatives:
There’s a reason for this: The Venezuelan economy was not well developed outside of oil because its geography is unforgiving.
Here’s an altitude map:
Venezuela is mostly flat, with two big mountain ranges: the Andes in the northwest (extending up the north coast), and the Guiana Shield in the southeast. That shield is where you can find the famous Tepuis:
And since Venezuela is just above the equator, half of it is covered by jungle. Here’s a satellite map:
Here’s what the jungle looks like:
The vegetation:
The savanna in the middle is the Orinoco River Valley, what Venezuelans call the Llanos.
People don’t realize how big a deal the Orinoco is: It’s the 3rd biggest river in the world by discharge volume!
That’s because the same equatorial rains that feed the Amazon also feed the Orinoco, through the funnel formed by the Andes and the Guiana Shield.
On paper, that valley looks great because it’s flat, it has a river to bring sediments, and there’s some rain, but not too much, so soil leaching is limited.
Unfortunately, the soil is terrible:
This is because the Guiana Shield is super old and close to the equator, so it’s been stripped of nutrients for eons, and any sediments that are deposited in the Orinoco Valley from there don’t add much fertility (hence the infertile ultisols, in brown on the map above). It’s also why the Andes side of the Llanos is a bit more fertile (yellow).
Brazil is in a similar situation, with old, infertile land. But they’ve spent billions improving it, and now they’re an agricultural superpower. Venezuela has not made a commensurate investment in its savannas.
The result of all this is that most of the economy was historically concentrated in the northern mountains, while most of the Llanos is pasture for ranching:
The population, like the economic potential, also concentrates in the Andes, in the valleys nested between mountains:
Here you can see a map of population density:
The people escape from the hot, humid, low-lying, infertile flatlands:
This is how Caracas ends up 900 – 1400m above sea level:
And why most of the Whites are on the mountains, while the jungle has a much denser indigenous population:
Of course, this is the tropical mountain trap we’ve discussed: Mountains are better suited for human settlement in hot climates, but mountains bring other challenges: Very expensive infrastructure, less trade, less communication, more poverty.
If we quickly summarize, Venezuela has:
Lots of hot, humid jungle, which is nearly impossible to settle densely.
A hot savanna with bad soil due to millions of years of leaching, and which hasn’t received the investment needed to fertilize it.
The mountains, where most of the economic activity lies, which is disadvantaged because of high transportation (and hence trade) costs.
Luckily, Venezuela has a lot of oil.
When I say a lot, I mean a lot.
And where are they? Do you notice something?
There are a few reserves in Lake Maracaibo to the northwest, and more in the Orinoco Valley. The vast majority of these reserves is in the Orinoco Valley, and their discovery is reasonably recent.
These regions have so much oil because they used to be shallow seas:
Shallow seas mean lots of animals, which fall to the sea floor over millions of years. Sediments from the Andes and Guiana Shield later covered these layers of dead animals, increasing the pressure and temperature, which create oil and gas.
But how did the Orinoco oil fields become the biggest oil reserve in the world? As the Pacific and Caribbean Plates hit the South American Plate, mountains rose, and the oil basically flowed southeastward until it hit the Guiana Shield.
This movement trapped the oil in the sands of this region close to the surface… Close enough that rainwater could filter in and carry the lighter types of oils away with it. Also, temperature dropped enough, and this was close enough to the surface, that bacteria ate some of the oil—the parts it could, the lighter oils.
The result? Yes, Venezuela has the biggest reserves of oil in the world, but that oil is very heavy and in sands.
This matters a lot: It’s why Venezuela is currently poor.
Remember this graph?
Notice it has two peaks, one in 1970, and the other in 1997. Why?
In 1971, the Venezuelan government nationalized the gas industry and passed the Law of Reversion, which stated that all the assets, plants, and equipment would revert to Venezuela without compensation upon the expiration of the concession, slated for 1983. Knowing that they were about to be nationalized, and that they would lose their investments, oil companies stopped investing. In 1976, Venezuela simply nationalized the industry.
It’s worth stopping here for a second. Between the 1970 peak and the trough in the 1980s, Venezuela reduced production by about 2M barrels per day, worth $200B today.
Eventually, the Venezuelan oil company recognized that the heavy oil sands were very hard to process and that it couldn’t do it alone. It invited big international oil companies to work together in joint ventures. As those companies came back, oil production started growing again.
After the 1997 financial crisis, demand for oil plummeted, and with it oil prices. As they reached $9, the price of oil was so low that it was above the cost to extract the expensive Venezuelan oil, so all investment was cut, leading to production shrinking a bit.
But then Chávez took office in 1999, and serious problems started again:
He fired 40% of the Venezuelan oil company’s workers in 2002 during a strike.
He diverted money dedicated to oil investment into social programs.
In 2007, he expropriated the oil companies once again.
Chávez died of cancer in 2013, so he never witnessed the consequences of his mistreatment of the oil industry. His successor, Maduro, did:
Just as Chávez died, oil prices crashed, making many of the expensive heavy oil sands economically unviable, especially without the know-how of big international oil companies. So the volume of oil that Venezuela could extract dropped, too.
After two decades of mismanagement, Venezuela’s oil industry is in tatters, and it’s very difficult to turn it around.
But it gets worse!
Venezuela is the typical victim of the resource curse:
A country discovers a resource that’s valuable and easy to extract and control.
So the government takes it over and milks it.
It can afford to waste money, so it does. Waste increases. Corruption increases.
Prices in the country rise. Other industries become uncompetitive and die.
Let’s start with exports. On the eve of Chávez’s power takeover, crude used to be 35% of the country’s exports and its derivatives another 32%, adding up to 67%.
In 2023, over 80% was oil and its derivatives, most of it crude, as the refining know-how had vanished from the country.
But note also how other exports shrank even more, due to the resource curse: They were crowded out by bad political management and the weight of the oil economy. You can nearly tell the entire history of Venezuela’s socialist authoritarian experiment with these four charts:
Chávez:
Took over the country when it was producing a lot of oil.
He was lucky to catch the entire upswing in global oil prices.
Thanks to that, the country’s GDP expanded. But risk was increasing, as the economy grew more and more dependent on oil.
Government spending outpaced oil income, and as a result the country was running deficits.
To be clear, some of that spending was beneficial for many people. The poverty rate went down quickly:
But this approach is always short-term. Just as Maduro took over:
Oil prices crashed.
Which accelerated the drop in oil production.
Together, these two tanked oil income.
In an economy almost entirely dependent on oil.
And the government ran massive deficits.
And what happens when you run massive deficits? You have to either reduce costs, issue debt, or print money. Since reducing costs is anathema in a socialist country, it issues debt.
But that works in the short term too, until the country defaults, after which nobody wants to lend money anymore.
Without income, with high expenses it didn’t want to slash, and no way to get more debt, the country did the only thing left: print money. Here’s a chart on inflation:
The resource curse is not only economic, but also of governance:
Let’s put some color to that, with the words of Jeff Kazin, the head trader of the US food multinational Cargill in Venezuela:
Cargill was/is the leading producer of critical staple ingredients such as flour, pasta, vegetable oil, and rice in Venezuela. I [had] a front row seat to the damage a kleptocracy did to innocent people.
The government took over our “minute rice” facility at gunpoint because we were “gouging” the nation’s poor. The government was never able to run the plant. It never ran again. It was returned years later with no equipment inside.
There are 1000’s of generals in the army. They are each given a slice of the economy to loot. The large number of generals made it difficult to organize a coup against the regime.
The government opened grocery stores and sold staples below the cost we sold them to the government. In theory they used petro oil money to lower grocery prices. Our regular grocery outlets were forced out of business. When the government demanded we sell them products below cost we simply had to shut down. The populous became ever more dependent on the government handouts.
Dollars: We needed dollars to buy raw materials like wheat from places such as the US and Canada. The government periodically allocated dollars that could only be spent on raw materials and freight. Eventually, only local companies willing to pay bribes received dollar allocations. Several facilities closed due to lack of raw materials.
My employees liked working for Cargill. The office was an armed compound with access to a gym, high-speed internet, global communications, and a weekly box of basic staples. Cargill provided a safe and secure environment, if only during working hours.
Employees became very close to others inside their apartment buildings. Going out on the street among a desperate population was not advisable.
I needed wood pallets for feed. We tried to export wood pallets to swap for grain. We refused to pay the bribes required to export the pallets.
I once tried to set up a closed-loop wheat-planting to flour-mill supply chain.
The seed wheat was stolen for food.
When we tried to ship seed wheat in containers via US donors, there was no way to get it out of the port without it being stolen.
Livestock: Our feed business completely collapsed. Even if you could raise a pig, you could not defend it from being stolen. Armed people were hungry.
Employees: In the end, my highly skilled team, along with other highly educated people, chose to leave. Cargill often found jobs for them in other Latin American countries. The regime was more than happy to see well-educated people leave. Helping these employees secure high-quality, stable jobs after fleeing remains one of the best things I ever did in my career. No one remembers millions in trading earnings.
This is a short list. In my opinion the first money spent needs to happen now and it needs to be food. The US is already on the clock. The current regime does not care if it starves the population. The orgy of theft will accelerate if they believe their days are numbered. VZ should be an outstanding customer of US-grown agricultural products. Rice, bread, wheat, vegetable oil, etc. Feed the people first.
Jeff Kazin
Former head trading Cargill
Hence pictures like this:
So of course, with this economic and political situation, a lot of people left.
They mainly went to countries across Latin America:
What’s special about Venezuela is that a huge chunk of its emigrants were elites.
This is why communism never works:
The government takes from those who produce to distribute to the rest
Because people don’t like when the government takes their assets, the government must become authoritarian to force the expropriations.
Those producing the most leave, to avoid both expropriations and authoritarianism.
Because those producing most left, production diminishes, and everybody is poorer eventually.
The rest has no incentive to work, as there’s no benefit in it.
Once the country has become authoritarian, the gun owners become the new elites and loot from the rest.
In effect, communism replaces productive elites with looting elites.
All this reminds me a lot of Argentina:
It also had a big resource that depended on international markets—agricultural products.
The government also took as much control of it as it could, to milk the cow.
It also overspent socially during bonanza years.
This also meant huge deficits in years when international commodity prices were down.
Which ended up with debt defaults and heavy inflation.
So if we look back at what has happened with Venezuela:
The country’s geography is pretty bad, with infertile tropical jungle and savanna, and people crowded in the mountains, which increases all costs.
It has one massive asset: oil.
But that oil is hard to get and refine, so it’s expensive and requires foreign expertise.
Oil resulted in a textbook example of the resource curse:
A destruction of other industries
Terrible mismanagement and poor governance
Mismanagement pushed out foreign oil companies, so Venezuela’s oil output shrank along with its value added: refined oil exports became crude exports.
When international oil prices crashed, Venezuela lost both volume and price, so its income tanked, and with it the entire economy.
Since state expenses didn’t shrink proportionally, the country entered into deficit, then debt, then default, then money overprinting, and hyperinflation, finalizing the total destruction of the economy.
In such a clusterf*, the elites escaped, brain-draining the country, and further destroying its economy.
Oil is the devil’s excrement.—Juan Pablo Pérez Alfonzo, Venezuelan minister primarily responsible for the creation of OPEC (along with Saudi Arabian minister Abdullah Tariki), 1976
This is the context needed to really understand what’s happening in Venezuela today. In the next article:
What will happen with Venezuela and the Venezuelans?
Was Maduro’s capture legal or legitimate?
How does that affect the US, Russia, and China? Greenland, Cuba, Taiwan?
How does it rewrite the rules of the world?
2026-01-05 00:32:39
This is the premium article of the week. There are so many AI updates that I’m pushing back the AI article to next week.
2026-01-02 04:22:10
One of the big tech transformations of 2026 will be robotaxis.
Waymo keeps eating market share in every market it enters, and it does so pretty fast. I expect that initial adoption will accelerate over time when they enter new markets, as their brand and safety reputation will precede them.
This is crazy. The founder and previous CEO of Uber once said robotaxis would destroy human cabs and ride-hailing cars because they would be cheaper. But Waymo is not cheaper! It turns out people prefer to ride without a driver! In retrospect, you can imagine why. Nobody to judge you, to talk to you if you’re not in the mood, to smell bad, to drive recklessly, to disregard app payments and request cash… Imagine when prices drop way below current levels.
Speaking of price drops, when Waymo moved from Jaguar to Hyundai, the cost of each of its cars dropped, potentially from ~$150k to ~$70k, because instead of having to be manually retrofitted, they started leaving the manufacturing plant as Waymos. Months ago, this was already predicted to happen eventually.
The company had said they’d be present in 10 cities by the end of the year, and it claims to be—apparently in Phoenix, SF, LA, Austin, Atlanta, Miami, Dallas, Houston, San Antonio and Orlando. But that’s just presence, not real operations. How are rides faring?
They’re growing thanks to more cities and more rides per city, not just stealing market share, but also creating more market:
450,000 rides per week translates to about 25M rides per year. This is slow! The last year was approximately linear. For Waymo’s own sake, it should be exponential, but it’s not.
And of course, it’s bad for jobs. Since a full-time Uber driver does ~4,000 rides per year, 450k rides per week is the equivalent of over 6,000 drivers already.1
Of course, the reason why Waymo’s growth should accelerate is because Tesla is hot on its heels, and when Tesla is ready, it’s going to ramp up much faster than Waymo:
“Cybercab is not just a revolutionary car design, it’s also a revolutionary manufacturing process. If you’ve seen the design of the Cybercab line, it doesn’t look like a normal car manufacturing line. It looks like a really high-speed consumer electronics line. The line will move so fast that people can’t even get close to it. It’ll be able to produce a car ultimately in less than five seconds.—Elon Musk in Tesla’s All-Hands, March 20, 2025
And that’s just the dedicated Cybercabs. It doesn’t take into account the millions of Teslas already on the street, which owners will be able to dedicate to ride-sharing to top up their incomes.
So when will Tesla be ready?
The key is safety. As soon as the cars can drive themselves with minimal or no human intervention, and they have substantially fewer accidents (and incidents) than humans, Tesla will floor the accelerator. And that moment seems to be approaching. Tesla’s supervised autonomous driving (FSD) is improving quickly and is now ~7x safer than human drivers. A recent update reduced human interventions by over 10x. The next step is unsupervised driving.
It’s the first of many to come.
How does Tesla fare when there’s no human present to supervise driving? Nobody knows yet, but it seems to have many more accidents.
But Musk says unsupervised driving is solved at this point, the company has released its robotaxi app in a dozen countries, and the company’s gigafactory in Texas will be mass-producing them in five months.
My prediction is that probably by the end of next year, we’ll have probably hundreds of thousands, if not over a million Teslas doing self-driving in the U.S. Unsupervised full self-driving where you do not need to pay attention. We’ll have a model that is kind of like some combination of Uber and Airbnb. If you’re a Tesla owner, you’ll be able to add or subtract your car to the fleet. So, just like an Airbnb, you could rent out your spare bedroom or rent out your house when you’re not using it—Musk, May 20, 2025
Musk has a track-record of optimism, so if you want to discount what he says, this is the market’s opinion:
So more than a 50% chance that Tesla can service Cybercab’s unsupervised ride-hailing within three months!
I don’t think Waymo has much time. As Ramez Naam says:
The autonomous taxi market is now a race between Waymo cutting hardware costs and Tesla getting their system to drive sufficiently well.
Legendary investor Bill Ackman doesn’t believe so, and has invested in Uber. The arguments:
Self-driving cars are bad in extreme weather so not ideal for all geographies.
Building a robotaxi is expensive, so they will have to be continuously in use to amortize the cost. Like a nuclear plant. That means they’ll only cover base demand, while peaks will be covered by human drivers.
Uber also delivers food. This adds demand for rides, which optimizes car utilization and helps amortize costs for drivers.
Uber already owns demand—hundreds of millions of people already have the Uber app downloaded and are used to opening it to summon a ride and to order their food. They won’t download another one for another type of ride.
Here’s why I disagree:
What captures more information, eight cameras on all sides of a car, or human eyes? The cameras are obviously much better. The reason why humans have been driving better than AI is not because of their ability to see, but because of the processing of this information. And information processing by AI is improving all the time. Supervised autonomous cars are already safer than manually driven ones, including in bad weather. It’s just a matter of time until unsupervised self-driving reaches that same milestone.
A Waymo will likely be more expensive than a normal car, at $60-$70k. But Tesla’s Cybercab won’t be, because it doesn’t have certain additional costs like LiDAR, its cameras aren’t expensive, and its extra costs compared to a normal car will be counterbalanced by eliminating elements, such as the steering wheel, pedals, steering column, backseats, backdoors, side-window mirrors, rear window, charging ports, or interior consoles. It will also use single-piece casting and simpler materials like a metal roof and framed windows. This will reduce the vehicle’s parts by 60% compared to the Tesla Model 3.
So Cybercabs will:
Eliminate the cost of drivers, which together with the Uber share take 70% of the revenue.
Reduce other costs like insurance.
The cost of the Cybercabs themselves will be in the same ballpark as normal cars driven by Uber drivers, maybe even cheaper.2
Remember, robotaxis will be ~8x cheaper per mile than Ubers with drivers!
With these economics, it’s worth it to buy a fleet of Cybercabs not just for baseload, but also for some of the peak demand.
Also remember that demand is going to change dramatically with robotaxis, as many more people will want to use them, and the more demand there is, the less spiky it is, so there’s a higher share of demand that becomes baseload vs peak.3
More importantly, Tesla has millions of cars on the road already! It costs an owner nothing to add his car to the pool! That’s where the cars for peak demand are going to come from.
It’s true that Ubers today have better utilization than robotaxis will in the near future, because Ubers also deliver food when there’s a lull in demand for rides. They call this “cross-dispatch”.
But utilization is more important for a human driver in an Uber than for a robotaxi, because:
Better utilization benefits both the car and the human
Humans can only work so long, so better utilization matters a lot more for them. Robotaxis can work more hours.
You go to Amazon instead of going to hundreds of brands online; you go to Twitter instead of asking thousands of people for their opinion; you go to Uber instead of soliciting thousands of drivers, or waiting for a cab. You normally stay with these aggregators because it’s impossible to get this range of options elsewhere.
This doesn’t apply to Waymo or Tesla’s cabs, though, because they’re aggregators, too. They’ll each have their own car fleet. What advantage will there be to get a ride through Uber as opposed to going direct to Waymo/Tesla? Although the costs might be slightly lower due to better utilization from cross-dispatch, the fares will be higher because of the fees taken by Uber and drivers! If people prefer a robotaxi, they will eventually move to dedicated apps, as is already happening in the markets where Waymo is present.
Many people have several ride-hailing apps on their phone, and when one is too expensive, they try another one. It’s not just because Tesla and Musk have an amazing marketing ability. It’s because every ride is a commercial. When you see many Cybercabs on the street and one day your Uber is late, or expensive, or smelly, or your friend orders a Cybercab… You will download the app too.
Also, Uber doesn’t have super strong global network effects. Its strength is mostly city by city, so its current global footprint is not a huge asset the way Airbnb’s is.
All of this is why Uber is desperate to partner with Tesla, but Tesla has turned them down. Why? Because Musk knows he has more negotiation power and he will eventually win.4
CNBC interviewer: Why doesn’t Tesla buy Uber?
MUSK: There’s no need.
From all this, here’s my best guess as to what will happen:
Waymo will continue growing.
It will partner with Uber in many locations because it’s true that Uber already owns demand.
Over time, people will grow more used to robotaxis, and will prefer them in many cases.
They will eventually download both apps.
At some point, Waymo will grow tired of sharing fees with Uber and will go direct.
Knowing this, Uber will probably ask Waymo for a certain number of years of exclusivity, during which Waymo can only operate through Uber in certain cities. Waymo will wait that out and then go direct, undercutting Uber through price.
At some point in the midst of this process—probably starting in 2026—Tesla’s robotaxis will appear, undercutting both Uber and Waymo in price.
This will be a widely popular topic, many people will learn about this from either the news or by seeing Cybercabs on the street, and the adoption of Tesla’s robotaxis will be fast.
Uber’s demand for rides will go down pretty quickly. It will still retain some riders and the food business, but at that point, Uber won’t have a strong advantage over pure food delivery businesses like Doordash. If it survives, it will be a smaller company than it is today.
As a result of all of this, I decided to buy some Tesla stock as I was writing this article over the last couple of weeks.5
Of course, these are not direct replacements, because people will be taking more rides thanks to robotaxis.
I’m seeing quotes for electric cars in Uber’s marketplace starting at $22k. Most quotes I’m seeing online are much higher than that, in the $35-$60k range. A Tesla 3 today costs $30-$40k, and the Cybercab will have 60% fewer parts and therefore, probably cost even less.
In reality it becomes more predictable, not less spiky.
An important additional point: Every time I read a take defending Uber against Tesla, it makes mistakes like: Assuming the ride fares will be the same, assuming that the take rate for the car owner should be in a similar order of magnitude vs those of Uber drivers, assuming people won’t switch quickly to a new app…
Note this means I have a conflict of interest, because it’s in my interest that others buy Tesla to increase its stock price. That’s why you should NOT take this as financial advice. Please don’t invest based on articles on the Internet, this is not financial advice, just information, and disclosure.
2025-12-27 02:05:02
After I shared my novel theory of why warm countries are poorer, your avalanche of amazing comments prompted me to respond with two articles. But I kept thinking about some of them, especially this theme, summarized in Astral Codex Ten:
I find this very interesting, and far more thoughtful than most attempts at this question, but I’m pretty concerned about his answer here to the objection that India, Cambodia, etc birthed great empires while being hot and non-mountainous. He says that they may have had high GDP, but always had low GDP per capita, which he pinpoints as the real measure of wealth. My impression is that pre-Industrial Revolution, all countries had low GDP per capita, because they were in a Malthusian regime where economic improvement translated to population density rather than increasing per capita GDP. Any differences between regions reflected minor fluctuations in the exact parameters of their Malthusianism and were not of any broader significance. So I think the India etc objection still stands and is pretty strong.
In other words: In the past, wealth always became people, because humans would simply convert their money into food to feed more children, up until they couldn’t afford to feed any more people.
I respect the author, , tremendously, so that gave me pause, and I’ve been pondering this ever since.
Eventually, I concluded that we could explore this question together on a trip around the world: Fly over a multitude of countries, zoom in on their most characteristic features of development, and from what we see, draw some rules of development and explore how heat and mountains might have affected them.
I’ve been wanting to do this forever anyway, and Christmas week is the perfect time, so please take your seat, fasten your seatbelt, pull up the window shade, and get ready for an adventure!
I have a very hard time finding maps of world population density before 1800. Here’s one from 1 AD:
Which reminds me a lot to this map:
And this population density map for 1908:
Put together, we can conclude that the places that had any substantial native population before the Industrial Revolution were:
Europe, and more recently its temperate offshoots (Eastern US, Australia / New Zealand, Buenos Aires, South Africa)
The Middle East (Turkey, Mesopotamia, and the Levant)
India
China
Japan
Egypt
What patterns can we notice?
Most of these are outside the tropics.
There is, indeed, a dearth of population around the equator.
The biggest outlier is India, especially southern India, which is densely populated yet close to the equator.
There are some other pockets of population: the island of Java in Indonesia, Nigeria, western Yemen, Vietnam, Cambodia, Thailand, Nigeria, Mesoamerica, or Northern Colombia and Venezuela.
Let’s compare this to a map of population and GDP per capita per latitude today:
We can basically see four main regions:
The very cold and rich region in the Northern Hemisphere, in blue
The rich temperate regions in the Northern and Southern Hemisphere, in green
The poor equatorial region, which is also not very densely populated
The transition region, which is poor but very densely populated
Regions 1 through 3 fit the theory that cool countries are richer pretty well. The key question is around region 4: If it is poor today on a GDP per capita basis, why are there so many people? Why has it hosted big empires throughout history?
I don’t think we need to rehash why region (2) is good, so our trip will take us quickly to the polar region (1) first. Then, we’ll switch out the heater for the AC to travel to the equatorial region (3). Finally, we’re going to the more contentious tropics (4).
If you look at a map of population density, you’ll realize this wealth just describes Europe’s Nordic countries.1 It’s nearly all Finns, plus some Swedes, Norwegians, and a handful of Icelanders and Russians.
Their development patterns are quite similar to those of slightly more temperate regions, because they have a similar climate:
They’re just farther north in Europe because the Gulf Stream (and the AMOC) warms them up.
OK so (1) is basically like (2), the temperate regions, extended upwards by the unique shape of Europe and the rotation of the Earth. This also explains the southeastern diagonal of temperatures and populations we saw before: Europe is warm despite being farther north because of the Gulf Stream.
Now let’s travel to the equatorial region, and here is where it starts getting interesting.
You can see it’s quite poor and not very populated.
You might assume that it’s less populated simply because it has less landmass, not because its population density is lower, but this map displaying population density per latitude shows basically the same thing:
If we look again at a population density map today:
The only part here that also seemed to have a big population centuries ago is India. We will look at it later on. Right now, we should wonder the opposite: Why are there so many very empty areas here? Here is a map of global annual precipitation:
Note how rainfall is brutal in Latin America (LatAm) between southern Mexico and Brazil, in Africa (from Guinea Bissau in the west to the Congo in the center), and Southeast Asia (especially Indonesia and Malaysia). Now let’s compare that to a map of erosion caused by rainfall:
Basically the same places that have lots of rainfall also have terrible erosion from rains. And this is a map of land quality:
Virtually all the regions hit by lots of continuous rains have crappy land. Let’s take a few examples, starting with America, because the continent is the only one elongated across all latitudes, so it clearly gives a sense of what happens at each one.
Let’s zoom in on that precipitation map.
When we looked at Brazil, I shared the country’s topography and population density:
Most people live on the mountainous coasts. São Paulo is 760 m high, for example. The south (cooler) is more populous than the north. And most of the cropland is actually to the south, as far from the equator as possible (and in the mountains!):
And more importantly and tellingly, the Amazon is completely empty. Yet it’s a massive flatland irrigated by a river system that competes with the Mississippi’s in terms of volume and number of big tributaries. Equivalent rivers in temperate regions (the Nile, the Ganges, the Yellow River, the Yangtze, the Mississippi, the Paraná…) are all densely populated.
If the Amazon had been in a temperate region, it would be massively populated and rich like them. But it’s empty, and not because of environmental protection efforts. It’s because its land is absolutely terrible for agriculture. When you hear that people are destroying the Amazon Rainforest, that’s not really true. The heartland is protected by geography. It’s the edges that are being destroyed. The Amazon is barren for agriculture because of the constant rainfall erosion.
It’s not the only issue. Diseases, of course. But we can’t just take a map of current disease, because there are so many confounders. For example, more populous areas will have more sick people by definition, even if the population is healthier. They will tend to have more infectious diseases simply because there is more density. More advanced societies tend to have their particular diseases. What we want to get at, though, is what diseases prevented development in the first place. For that, I think we should take as proxies the diseases that are known to have caused the most trouble to humans throughout their development, and at the top of the list is malaria.
It’s especially active in the Amazon rainforest. Flat, low-lying, and rainy.
To escape this terrible fate, Colombians live in the mountains, as we have seen.
Here’s Medellín:
In contrast, the Pacific coast is completely uninhabited, because it’s the hottest, rainiest part of the country, full of impenetrable jungle and hard to turn into cropland. Then, if you look around on the Internet, you’ll hear some of the themes we’ve discussed:
People from there are called lazy
Rife with disease
Very little infrastructure
The infrastructure that does exist gets destroyed frequently by the weather
Here’s a map of ethnicities in Colombia:
Basically the mountains in the middle are mostly mestizo or white, while the rainy, low-lying regions of west coast and the Amazon are Afro-colombian and indigenous respectively.
Meanwhile, the northwestern coast is actually somewhat populated. How come?
It doesn’t rain as much!
So we’re anecdotally seeing four factors directly affecting warm countries’ development in action
Rainfall: Extremely high around the equator, making farming nearly impossible, and hence big populations.
Disease: They affect the warm, humid, low-lying areas the most.
Mountains: People living higher up avoid so much rain and heat.
Sometimes, even close to the equator, some areas might not have as much rain, and the population is higher there than where it rains a lot.
Race: White people are especially prone to disease, so in these latitudes they tend to live in mountains. As we saw in the previous article, White presence is a market of development, even if we don’t know the causality (it can simply represent a higher transfer of human capital from the more developed Europe back then).
Now if we move east to Venezuela, it’s at the same latitude so we should see the same process. Do we?
This is a map of topography vs population density:
As you can see, most of the population is in the mountains. Caracas is at 900-1400 m of elevation.
Moving south, the same Colombian pattern of population can be found across the Andes, in Ecuador, Peru, and Bolivia:
As we discussed, this is where we find the only equatorial civilization that emerged independently in the world, the Incas.
As we move south and we enter temperate regions, the pattern reverses, and the populations appear on the lower plains of Brazil, Uruguay, Argentina, and Chile.
If we move north from Colombia, towards Panama, we find the Darién Gap, a region so brutally rainy that there is still no road that connects these countries! The Pan American Highway, which reaches both polar seas and traverses virtually all climates across dozens of countries, can not close this 100 mile (160 km) gap.
This is a zoom in on the area:
And this is what the Darién Gap looks like on the ground:
You can see many of the things we’ve discussed here. The quantity of water is hostile. It creates rivers, it creates mud, it erodes the soil (hence the mud. Look at the exposed tree roots), the humidity brings disease…
This is where the Panama Canal was meant to be built, but the disease burden prevented it from happening. It was pushed north, but the construction still cost tens of thousands of lives from disease. This is Wikipedia on the French attempt to build the canal:
From the beginning, the French canal project faced difficulties. Although the Panama Canal needed to be only 40 percent as long as the Suez Canal, it was much more of an engineering challenge because of the combination of tropical rain forests, debilitating climate, the need for canal locks, and the lack of any ancient route to follow. Beginning with Armand Reclus in 1882, a series of principal engineers resigned in discouragement. The workers were unprepared for the conditions of the rainy season, during which the Chagres River, where the canal started, became a raging torrent, rising up to 10 m (33 ft). Workers had to continually widen the main cut through the mountain at Culebra and reduce the angles of the slopes to minimize landslides into the canal. The dense jungle was alive with venomous snakes, insects, and spiders, but the worst challenges were yellow fever, malaria, and other tropical diseases, which killed thousands of workers; by 1884, the death rate was over 200 per month. The French effort went bankrupt in 1889 after reportedly spending US$287,000,000 ($10 billion in 2024); an estimated 22,000 men died from disease and accidents, and the savings of 800,000 investors were lost.
As you move north across Central America, the pattern continues.
Across every country, the population gathers on the mountains, seldom on the plains.
Many of these mountains, by the way, are volcanoes.
We saw exactly the same thing in Mexico.
So, the two big empires to come from Latin America, the Incas and the Aztecs, were born in the mountains.2 Interestingly, in this entire area, the only other civilization to emerge was the Maya. Crucially:
The Maya lived in the driest parts of the region, as you can see on the map below
A sizable share of their settlements were on the mountains.
They were never a huge, centralized civilization.
They fell several times—maybe due to big rains and diseases?
If we look at a map of malaria prevalence in the region today, it won’t be a perfect reflection of historic conditions, because lots of work has been done to eradicate it, but here’s what we have:
It’s consistently prevalent on the biggest plains close to the equator.
Now look at this map, showing the risk of landslides in Central America:
This adds one more factor to our framework: Mountain societies also have to deal with landslides as an obstacle to development.
So that’s it for America. Let’s move on to Africa.
Let’s compare rainfall with topography and population:
There’s a ton going on here, so let’s break it down. We’re going to move quickly through the areas we visited in the original article and dive deeper into the more interesting ones.
When there’s no rain, there’s no people. The Sahara, the Kalahari, and Somalia are empty. This is common in horse latitudes around the world, because of latitude and the atmosphere.
Ethiopia’s mountains catch the monsoon rains that would otherwise go to Somalia, so it’s cooler and rainier. That’s why it’s Africa’s 2nd most populous country.
The Rift Valley is the mountain chain that concentrates the most population in Africa... and it’s in the highlands.
The Maghreb in northwestern Africa is on the southern border of temperate regions. Mountains catch rainfall, and people live on them (as they’re more fertile) or on the coast, which is dry but includes the rivers from the mountains.
Let’s zoom in a bit on Egypt, which as we know is just the Nile.
It’s farther south than most other big ancient civilizations, which makes it a bit of an outlier. It’s quite warm. But it’s also extremely dry because it’s in the horse latitudes. The dryness means no diseases, and no leaching of soil from excessive rainfall. You still get the problem of lower productivity because of the heat, but does it matter here?
The heart of Egypt is the Nile, and it spawned a hugely successful civilization because it has lots of water flowing through flatland and so it fertilizes itself! In How Rivers Shaped States, we saw how the annual flooding of the Nile swamped the riverbanks with water and sediment. This is also why a very strong state emerged, as it was so easy to calculate the potential for food production of every plot (just note the high water mark), that taxation was simple. Crucially, the land didn’t require much work at all. Only during some key periods, so the productivity cost that comes from heat was bearable. It’s also why, I assume, the Egyptians could build the pyramids: There was so little work involved in agriculture that, outside of harvest times, the state could recruit this surplus of labor for its vanity projects.
So I’d say Egypt corresponds quite well to our theory.
The Congo is another country that corresponds perfectly. It’s the 2nd biggest country in Africa, but only the 4th in population. It’s 37th out of 54 in population density, and that’s despite basically occupying the entire Congo river basin!
The Congo River is the 2nd biggest in the world by discharge, basically the Amazon River of Africa.
Yet no big civilization has ever emerged here. Of course, the logic is the same as in the Amazon: too much rainfall, too much leaching, soils are bad for agriculture.
And the endemic diseases are terrible. Hence why most of the population in the region lives on cooler mountains.
Now, adding malaria:
You can see most of the regions with big population centers tend to be in the mountains, where malaria is less problematic. The Congo is the most illustrative example, as it’s basically one big blob of malaria because it’s a large, low-lying, super wet, equatorial region. In comparison, the population centers in the highlands of the Rift Valley and Nigeria / Cameroon have the least malaria.
It is not the only disease. Here’s a map of trypanosomiasis, the sleeping sickness spread by the tsetse fly.
It thrives around the equator, especially in and around the Congo, and it doesn’t just incapacitate humans, but also big mammals. Spread by the tsetse fly, it kills essentially all horses and roughly 70–100% of cattle in the areas it inhabits.
Reader Rhea added this comment on Cameroon:
Douala, the metropolitan and extremely hot region, is considered lazier than the cooler mountainous city of Bamenda. I recall attending the state fair on a very hot day. I was exhausted and slow in mind and body. I recall a man telling my parents “it’s the heat, it affects the brain.”
So we’ve accounted for central Africa. There is, however, a big population center in a low-lying area of Africa that doesn’t fit our theory as well.
This is West Africa:
As you can see, from south to north it changes from jungle to savanna, then Sahel, and finally becomes the Sahara desert. Thus, it’s not surprising to see high population density in the savanna, sahel, and northern jungle:
It is not so flat:
Most of the major population centers are on these highlands. Here you can see the corresponding croplands:
Although this region has been populated for quite some time, it was never as populated as other world regions, and has never created a significant, lasting empire. The most famous ones are these:
They were all built around the Niger River, which has an inland delta, in the savanna and in the Sahel. This prevented it from creating the type of structure that exists in Egypt, which gets a single continuous river that reaches the sea and never dries up. Instead, most of these empires’ economic booms were not due to agriculture, but to gold and slaves. When the gold ran out, so did the empires.
But when you look at the mouth of the Niger, you see this:
Here:
It rains a lot. The latitude corresponds closely to that of the hyperrainy Colombian Pacific region.
It’s flat and coastal.
Yet it has cropland.
And it’s hyperpopulated today.
That said, by far the biggest crop in Nigeria today is cassava, which comes from America, a clue that suggests the population of this specific delta was likely not as high in the past.
Here’s my guess as to why:
Historically, this region was not nearly as populated as others like Egypt, India, China, or Europe. This is why it has not generated any significant empire.
It’s very close to other regions that don’t have as much rainfall and do have large population centers, so it can always be replenished by people from elsewhere when famine or disease strikes.
At the mouth of the Niger, it receives a ton of sediment to fertilize the land, so it has some agricultural productivity despite terrible soil (because it’s old and leached by rainfall).
It gets a lot of rain, but seasonally, from the monsoon, which means it’s not battered by daily leaching rains like the Amazon or the Congo, allowing some of that fertilizer to be retained.
It’s still rife with tropical diseases, which have hindered its development in the past.
The heat, humidity, and nearby mountains have probably hindered its productivity, so its GDP per capita has never been high.
There’s one more thing that South America and Africa share.
Parts of both continents are very old, so their soil has been leached for eons, making it quite poor for agriculture. Yet another reason it was hard for big civilizations to emerge there.
I’ve never mentioned Madagascar, but it’s a pretty good illustration of the dynamics we’re discussing, so here it is:
The highest density is in the mountains, there’s a secondary center of population on the windward coast (which gets more rain), and all regions are quite poor.
OK so I think we’ve got a good sense of what’s happening in Africa. Let’s move to Oceania, and then finally to Asia.
There are many examples here that illustrate our theory, starting with Australia.
From the previous article on the topic, from a commenter:
By area it is mostly a hot desert, but its institutions and GDP have flourished on its temperate southern coast and the entire country has benefitted from them.
An equatorial island with flatlands and mountains down the middle. Where do people live?
Yeah, mostly on the mountains.
Malaria, however, is exactly where you’d guess.
New Guinea is also famous for its unbelievable diversity (hundreds of languages!) and its corresponding proclivity to conflict.
This is the poster child. New Guinea is tropical, mountainous, poor, multicultural, and prone to diseases in lowlands and conflicts in highlands.
But in the same region, there’s one big outlier that seemingly defeats the theory.
Java, with 156 M people, has a bigger population than Russia. From the article on the island:
Java’s population density is 1,100 people per square km.
This is 3x the density of Japan or the Philippines, 7x that of China, 30x that of the US. It’s nearly the density of Houston, Texas. For an entire island! With volcanoes!
Even weirder: Its neighboring islands in Indonesia are not that densely populated.
Compared to its biggest neighboring islands, it’s 8x more densely populated than Sumatra and 30x more than Borneo!
Why!? What made this island so special?
The answer is volcanoes.
Basically all the islands in the region are like Congo or the Amazon rainforest: They have massive amounts of rain leaching the soil, and they can’t easily farm anything. But the ash from Java’s volcanoes constantly fertilizes the soil there, making it incredibly productive.3
This is why it’s so populated today, but this is a reasonably recent phenomenon. Back in the 1800s, its population was smaller than Germany, France, or the UK.
This is also true of other countries like Thailand, Malaysia, or the Philippines (which also benefits from volcanic fertility, but without the equatorial leaching rains). In fact, it’s time for us to move on to the most important region, Asia.
We discussed in the original article on Mountains how Iran embodies the theory perfectly.
But of course, neighboring Turkey also does. Its capital, Ankara, is at 1,000 m altitude (~3,000 ft).
Afghanistan never had a big enough population to create a strong local civilization because it’s too elevated and dry.
But it’s a good example of some of the dynamics we have discussed. Infrastructure is very hard. As a commenter said:
Seasonal rains have been known to completely destroy bridges—not destroying the bridge itself, but by washing out the approaches, leaving the bridge perfectly intact in the middle of a new wider river.
He also added that balkanization is intense here.
China is a poster child of our theories.
Its heartland is in the north—the perfectly temperate North China Plain. Over time, China conquered the south little by little. But the farther it went, the harder it was, as it confronted more mountains, mosquitoes, and malaria. It took the north a very long time to finalize dominion over the south, and even today, the mountainous Yunnan region has about 50M people, who are still ethnically different from the Han, and politically remote. In that region, you start seeing communities on plateaus that you don’t see in the north—like the capital, Kunming.
Vietnam, Thailand, and Cambodia are also quite informative.
Lots of mountains and jungle here, but wherever you have a big valley with a river, you also have a decently-sized civilization today.
So it doesn’t look like this is close enough to the equator for populations to grow better in mountains. But also this region doesn’t have elevated plateaus, so we don’t have a counterfactual example. What we can tell, however, is that the farther south you go, the less population there tends to be:
The Malay peninsula, farthest south, is not very populated.
In Vietnam, the south has the Mekong River valley and delta, and they’re much bigger than the north’s Red River valley and delta. However, the Red’s valley is much more populated than the Mekong’s in Vietnam.4
The valley of the Chao Phraya in Thailand, which extends into Cambodia, is huge, yet in the past its population wasn’t as massive as China’s.
If we look at rains in the region:
It seems like a key condition is to not have rain year-round. The tip of the Malay Peninsula, like the islands of Sumatra, Borneo, and New Guinea, have rain year-round, and none are highly populated. We saw the same pattern in America (e.g. the Darién Gap), and Congo vs Nigeria.
Interestingly, a similar pattern can be seen in the Philippines: The northernmost large island (Luzon) is much more densely populated than the southernmost large one (Mindanao). Within Mindanao, the least populated part is the east coast, which receives rains virtually all year long.
Also, we can see how Java is actually south enough to get at least some dry season across the majority of the island.
There have been a couple of empires in this region in the past, the Khmer in Cambodia, Siam in Thailand, Burma, and Vietnam. But most of these only emerged in the 1200s or later, and none had big populations. The Khmer, in Cambodia, emerged earlier, but their apogee was also in the 1200s, and its population didn’t even reach 1M back then (700k-900k). For comparison, Rome 1,000 years earlier had 60M-75M, similar to China’s and India’s. Egypt had 4-8M thousands of years earlier.
This leads us to our final destination.
India is a mix of everything we’ve seen.
Most of the population is actually in the north:
It follows the Ganges River Valley. The population in the rest of the country is less dense. But it also tends to live more on mountains!
Bangalore, for example, one of the southernmost big cities in India, is 1,000 m (~ 3,000 ft) high.
Also, if you go back to the animation of rainfall throughout the year, you’ll notice the long annual periods of drought, which make sense since most of the country occupies similar latitudes to Arabia and the Sahara desert. But the drought periods are followed by the intense monsoon that then brings sediments down to fertilize the Ganges Valley. This wet-dry cycle reduces soil leaching and diseases.
If we summarize:
Temperate means population and wealth.
The most prolific societies have tended to develop in the yellow / brownish / green areas below: US, Canada, Mesoamerica, Incas, Argentina / Chile, Europe, the Atlas / Maghreb, South Africa, the Rift Valley, Ethiopia, Levant, Anatolia, Mesopotamia, Persia, China, Korea, Japan, Australia, New Zealand…
Even in smaller countries, we see a similar pattern where people tend to live in cooler mountains than on the coasts, like Madagascar, Cameroon, and New Guinea.
Near the equator, there are few, poor people
This is because the intense, continuous heat produces intense, continuous rains, which in turn leach soils and cause disease. This is why populations and wealth have been very limited in the Amazon Rainforest, any low-lying region in Central America, the Congo, Malaysia, Indonesia, and most of New Guinea.
In my previous post, I had not noted the importance of constant rains and their consequence:
Lots of soil leaching, so little agriculture, so little food, and fewer people
Even more disease than elsewhere, imposing a productivity toll
Exceptions are rare and very telling. The main one is Java, which fights the leaching through volcano ash. Another is the Niger Delta in Nigeria, which seems to have developed recently, has a dry season, and is fertilized by the Niger’s sediments.
The transition between equatorial and temperate climates creates unique situations based on local conditions, so you have to pay attention
Here, there aren’t constant rains anymore, so leaching and disease are less prevalent. It’s still hot, so elevated plateaus in these regions did give birth to civilizations (e.g., Mesoamerica, Iran, Anatolia). But they aren’t necessary for civilizations to emerge:
Egypt is hot but it doesn’t have any leaching, and the burden of disease is low thanks to the year-long dryness of the environment. Fertilizer is brought by the Nile.
In Indochina, there’s more development as you move north. The southern tip gets year-long rains, and has very little population. All regions that developed have strong fertilization via rivers (which brought the sediments leached by the seasonal local monsoon). The civilizations that did emerge did so later, with smaller populations than in other regions, probably due to the harder conditions.
India has both a dry and a wet season. The north is the most populous. It also happens to have the Ganges (and the Indus in Pakistan), a great, year-long source of water and fertilization. The south is more mountainous, and the elevated regions are quite populated. My guess is that heat and disease burden have hindered the country along its history, even if not enough to stop it from becoming so populous.
This also brings us back to Malthus and the sources of wealth. Today, we’ve mixed GDP with GDP per capita, because of the Malthusian idea that more wealth meant more people. But this is not completely accurate.
Agricultural productivity used to be the determining factor of civilizations, because virtually all the economy was focused around food. So everything we said today is relevant broadly until the Industrial Revolution. For agriculture, heat and humidity are fantastic, but leaching and disease are not. This is why, until the 19th century, the poorer regions were those very close to the equator, where leaching and disease were the worst.
This also means there is a discontinuity in agricultural productivity: It’s really bad close to the equator, but the more humans escaped year-long rains—which happens around both tropics—agricultural conditions quickly improve. This is why wealth measured as people or GDP is more common in warm countries than GDP per capita.
That was before the Industrial Revolution. Afterwards, the productivity of agriculture matters less. And outside of agriculture, leaching doesn’t matter at all, but disease and human productivity still do. So temperature and humidity have hindered the rest of the economy. This has happened a lot directly, but also by pushing people to live in the mountains. This factor is more continuous than leaching though, so the farther from the equator, the better.
I would also like to add some theories from commenters, which I haven’t independently verified but sound reasonable:
Steven Weisz argues that more seasonal variance requires more planning, which in turns begets more human capital development to make it happen, and probably a more adapted culture and institutions.
Al MacDonald suggests that people living in the mountains have less oxygen, which might make it harder to exert yourself.
If we add up everything, this is what we get:
I hope you took advantage of the holidays to read and enjoy this massive article! Next week, we’ll be back to close 2025 with a retrospective of two topics we’ve explored during the year: Robotaxis and AI. I’m extremely excited about what comes next, which I’ll share very soon. In the meantime, merry Christmas and happy holidays!
And maybe a bit of the oil & gas regions of Russia.
Tellingly, the earliest predecessors to the Aztecs were the Olmecs, on the coast, but their civilization was never as rich or populated. Teotihuacan followed, and it was much bigger and powerful—and on the mountains.
Unsurprisingly, many of its biggest cities are nested around volcanoes, like Bandung or Malang.
I’m going to guess this is an underdiscussed reason why the north beat the south in the Vietnam War.
2025-12-20 21:02:33
Lots of interesting stuff, just jump to what’s interesting to you! Today:
Were the Dark Ages actually dark?
What we’ve learned about US history: civilizations older than Egypt, super early settlements, the role of silver in the US’s independence, how the US kick-started its industries, and how that influenced the North-South war.
When Spain wanted to conqu…
