2026-03-15 16:45:03
“Imagination/ That’s the way that it seems/ A man can only live in his dreams” — The Flaming Lips
“No future/ No future/ No future for you” — The Sex Pistols
If you have kids — or if you’re planning to have kids in the future — I want you to think about a question: How will you make sure your kids have a successful life?
Obviously, this isn’t a question that anyone can ever answer with certainty. But ten years ago, in 2016, you could have given a pretty good answer. You’d work hard and save money and invest wisely, so you would have enough family wealth to cushion against unexpected shocks. You’d teach your kid good values, make sure they went to a good school, and send them to a good college. You might even encourage them to enter a promising elite professional field, like software engineering, medicine, or law. If you did all of this, you could be reasonably confident that your child would grow up to be at least economically secure, and probably upwardly mobile as well.
What answer would you give now, in 2026? Do you have any confidence that colleges — even top colleges — will actually teach your kid the skills they need to make it in a job market defined by AI? What field of study could you recommend to your child, knowing that there’s a possibility it will be automated by the time they finish studying it? Will even family wealth be enough to protect your descendants, in a world where land and energy are being gobbled up for data centers?
The sudden rise of artificial intelligence has cast a great fog over our future. It may bring wonders beyond our comprehension — the end of aging and disease, material hyperabundance, digital worlds to suit our every desire, expansion into outer space. Or it might bring chaos and destruction, as rogue agents wreak havoc with bioweapons and drones. Or it might become a superintelligence that turns us all into house pets.
Your kids might be chronically unemployed, as the CEO of ServiceNow recently predicted. Or AI tools might turn them into highly paid super-workers, as the founder of Uber recently predicted. The truth is that they don’t know, and I don’t know, and you don’t know either. Financial markets don’t know either. The people actually building AI certainly don’t know. The future is a blank wall of fog, rushing toward us at top speed, and nobody knows what to do.
Plenty of people have predicted this. It’s called a Technological Singularity — a period of accelerated technological change so rapid that it’s impossible to predict what life or society will look like afterwards. You can argue that the Industrial Revolution was a kind of Singularity, moving humanity in today’s developed countries from the edge of starvation to material abundance. Who could have predicted, in 1890, what life in 1990 would look like? And the AI revolution is happening much faster, promising to compress a century’s worth of change into a couple of decades.
AI may be the biggest thing casting a fog of uncertainty over our future, but it’s not the only thing. The political chaos of the last decade, and especially the governing style of the second Trump administration, has swept away much of what we thought we knew about American society. The rise of China has raised the possibility that global power will now reside with totalitarian countries instead of democratic ones. The possibility of another world war looms.
Now here’s the crucial point — even back in 2016, this period of rapid change was on the way. Most people just didn’t see it coming. Everyone who thought their kids would be safe if they just followed the standard 2016 playbook — a good college, a professional career — was wrong. They just didn’t know they were wrong yet.
But because they didn’t see what was coming, they were optimistic. Back in 2016, 69% of Americans expected a good life in the future — a number that’s now down to only 59%:
Even during Covid and the Great Recession, American optimism about the future didn’t waver. We “knew” — or at least we thought we knew — that we would recover from those shocks, and be able to live a good life. We might have been wrong, but we thought we could see the future — and it was those extrapolations that comforted us, even as we endured one shock after another.
It occurs to me that this can also explain why Americans are so nostalgic for the 1990s and the early 2000s.
2026-03-13 03:41:06
The other day I did something I’ve never done before: I made a major political donation.1 I gave $10,000 to GrowSF, a political advocacy organization that focuses on local elections in San Francisco. They’re going to use the money to support Alan Wong in the upcoming special election for District 4 supervisor.
Usually, I’m pretty pessimistic about the ability of political donations to affect the course of society. The influence of money in politics is exaggerated in general, and the amount that I’m personally able to contribute is pretty modest; in almost all cases, I think I’ll probably have a bigger impact just by writing blog posts. But in this particular case, I think I might actually be able to make a noticeable difference by donating a little bit of money — especially because it gives me a good excuse to write about the political situation in San Francisco.
Basically, for a number of years, San Francisco was the poster child for a style of progressive urban governance that has been failing in cities across the country. I wrote about this governance debacle shortly after Trump was elected in 2024:
In the 1990s and 2000s, America’s big cities had an urban revival. Pragmatic liberals like Michael Bloomberg in New York City and Ed Lee in San Francisco were some of the most important leaders of this revival. They recognized the value of business as the city’s tax base, and they recognized the importance of public order for maintaining a livable urban environment. They were not perfect; they failed to build sufficient housing, setting the stage for the urban housing crisis of the 2010s and 2020s, and they continued or accelerated the unfortunate trend of outsourcing city government functions to nonprofit organizations. But overall, they were successful in turning American cities into places that people actually wanted to live in again.
As people — especially people with money — moved back into America’s cities in the 1990s and 2000s, the housing crisis worsened, because cities didn’t meet the increase in demand with an increase in supply. But at the same time, America was sorting itself politically — the big cities leaned increasingly to the left.
That political shift enabled the rise of a new, radical kind of urban progressive ideology. If the old liberalism had been complacent about the need for housing supply, the new progressivism was downright hostile to it; drawing on the anti-gentrification movements of a previous generation, hardline progressives embraced the mistaken idea that allowing the construction of new apartment buildings raises rents:
In fact, an overwhelming amount of evidence supports the fact that allowing new housing reduces rents for everyone. But in refusing to hear that evidence, urban hardline progressives have essentially allied themselves to an old-money NIMBY gentry that wants to keep cities frozen in amber with development restrictions.
At the same time, the new urban progressive ideology became extremely tolerant of public disorder — property crime, low-level violent crime, public drug markets, and threatening street behavior. Cracking down on these social ills was viewed as unacceptably harmful to the perpetrators; in other words, hardline progressives came to view anarchy as a form of welfare policy.
Penalties for minor crimes were reduced, enforcement of public drug markets was curtailed, and citizens were even forbidden from defending their own businesses from criminals. “Tent cities” were tolerated despite being riddled with violent crime, police budgets were slashed, progressive prosecutors like San Francisco’s Chesa Boudin prosecuted fewer crimes, dangerous repeat offenders were regularly allowed back onto the streets, and so on. Inevitably, poor people were the ones most heavily impacted by the epidemic of crime and drug use that this anarchy enabled.
Together, high housing costs and rampant public disorder made America’s big blue cities no longer the envy of the world. Meanwhile, hardline progressives simply doubled down — responding to high housing costs with yet more restrictions on development, and responding to disorder with yet more tolerance of disorder, all while funneling increasing portions of the city budget to well-connected nonprofits that often turned out to be ineffectual and corrupt.
In San Francisco, this hardline progressivism did not come from the mayor’s office. Most policy decisions in SF are carried out by — or must be signed off on by — the powerful Board of Supervisors. The Board of Supervisors writes the laws, approves and amends the city budget, confirms mayoral appointments, and exercises veto power over almost any major reform effort.
For many years, San Francisco had a moderate liberal mayor but a hardline progressive majority on the Board of Supervisors. Mayors wanted to build more housing and crack down on disorder and crime, but the progressive supermajority on the Board would not allow them to do so. Mayors like London Breed often took the blame for the city’s descent into unaffordability and chaos, but the prime culprit was always the hyper-progressive Board.
Under the aegis of hyper-progressive city government, San Francisco had the highest property crime rate in the nation in the late 2010s, and became one of America’s least affordable cities. The pandemic only accelerated these trends — the city’s population crashed and failed to recover, the streets became open-air fentanyl markets, transit ridership plummeted and didn’t bounce back, and housing production crashed from low levels to almost nothing. Malls closed, businesses pulled out, and downtown felt like a post-apocalyptic wasteland long after most other cities had recovered their verve.
Then, in 2024, an election changed everything. The change everyone knows about is the election of Daniel Lurie as mayor.
Lurie made public order his #1 task. Within a year, crime had plummeted:
[O]verall crime in [San Francisco] went down by 25% in 2025, with the number of homicides reaching a level not seen in more than 70 years…Property crimes were down by 27%, while violent crimes were down by 18%…The mayor added that the city planned to keep on hiring new officers, following an executive directive he signed in May. In October, the department reported the largest surge of recruits in years…
The department also credited the Drug Market Agency Coordination Center in leading to more than 6,600 arrests in connection with drug-related activity. Officers said they had also seized more than 1,000 firearms and more than 56 pounds of fentanyl…Meanwhile, retail theft operations have led to key arrests, resulting in reductions in larcenies and retail thefts.
Other notable crime trends touted by city officials include a 16% decrease in shootings, robberies being down 24%, car break-ins down 43% and vehicle thefts being down 44%.
On the ground, the change is absolutely palpable. In 2023 I would see thieves ripping pieces out of car engines in broad daylight. Almost every day I walked past throngs of drug users (and probably dealers). Every woman I knew was harassed on the street or on the train. There were needles and human feces on the ground everywhere. Stores were boarded up, train cars ran almost empty, tent cities lined side streets and the spaces under overpasses. Now, most of that is gone — the streets aren’t clean, but they’re closer to NYC than to a developing-country slum.
Progress on housing has been slower, due to the dense thicket of existing regulations and entrenched NIMBY interests that must be hacked through in order to actually get new housing built. Lurie passed a landmark upzoning plan, which doesn’t go nearly far enough but is a huge improvement on anything in recent decades. Now permitting is accelerating:
San Francisco’s infamously slow building permitting process may be getting faster…A city study published Thursday found that between January 2024 and August 2025, the timeline on permit approvals for new housing in San Francisco was cut by half — from an average of 605 days down to around 280 days…And permit applications that were filed within that 19-month window had even shorter turnaround times, at 114 days on average…
[A] state-commissioned report published in 2022 found that San Francisco was the slowest California jurisdiction to approve permit applications for housing projects…[But] Mayor Daniel Lurie has…focused on improving the city’s buildability, launching his landmark ‘PermitSF’ initiative to centralize the application process last year. In February, his office introduced an online portal that allows people to apply for certain types of permits.
It will take years for those permits to turn into actual homes. And the reforms that Lurie has managed to enact are only the tip of the iceberg in terms of what’s needed — much of which needs to be done at the state level.
But overall, things are looking up. Lurie’s approval rating reached 73% half a year into his mayorship (compared to 28% for his predecessor). In November it was still 71%. Everyone loves Daniel Lurie — and so do I. He’s not perfect, but no mayor has ever been perfect. His successful policies range far beyond what I’ve listed here — he’s added homeless shelter space, cut taxes on apartment buildings, removed anti-police activists from the Police Commission and appointed a better police chief, encouraged conversion of offices into homes, created free childcare policies and various early childhood programs, implemented policies to protect pedestrians and cyclists, cut various forms of red tape for housing and small business, streamlined business permitting, worked toward balancing the budget, and so on.
But here is the real point: Almost none of this would have been possible if the Board of Supervisors had still been controlled by hardline progressives.
The same election that brought Daniel Lurie into the mayor’s office also changed the composition of the Board. The “progressive” faction, which had enjoyed a supermajority on the Board, suffered a major defeat, with progressive stalwarts like Dean Preston being unseated by moderate liberals like Bilal Mahmood. The moderate liberal faction — which would be labeled strongly progressive in most of America, but who are regarded as centrists in San Francisco — gained a slim 6-5 majority on the Board.
Though Lurie has gotten most of the credit for SF’s turnaround, that slim Board majority was absolutely essential. The new laws Lurie has passed would not have been passed, nor would Lurie’s personnel appointments have been confirmed, had the Board been 6-5 in favor of the “progressives” instead of 6-5 in favor of the moderate liberals. A one-seat swing toward the hardline progressive faction would have meant a San Francisco that was still mired in all of the old urban dysfunction that progressive cities have been struggling with for a decade and a half.
And now that one-seat swing may actually happen, and San Francisco’s recovery might be derailed. District 4’s supervisor Joel Engardio, an important moderate liberal voice on the Board, was recalled last fall over his support for a highway closure. Lurie appointed Alan Wong to fill in the District 4 spot, but now Wong is facing a special election on June 2 to keep that seat. It’s a crowded field, and some of Wong’s rivals are very well-funded.
The other candidates in the race — Natalie Gee, David Lee, and Albert Chow — are all more opposed to Lurie’s pro-housing agenda than Wong is. If Wong loses, San Francisco’s reforms under Lurie so far probably won’t be repealed — at least not immediately. But the majority on many issues would flip back to the “progressives”, and further reforms would become much harder if not impossible. This would be especially harmful to the housing agenda, where upzoning efforts look promising but will require more years of sustained effort to reach fruition.
This is why I decided to give $10,000 to an organization supporting Alan Wong.2 I don’t live in District 4, and I’m sure his opponents are very nice people, but this election is about more than just District 4 — the composition of the Board of Supervisors determines the destiny of the entire city of San Francisco. The Outer Sunset will benefit from a moderate liberal majority on the Board, but so will the rest of us.
My city’s chronic inability to build sufficient housing has hollowed it out. It has forced huge numbers of middle-class people, working-class people, and artists to move far away from the city, leaving SF to the rich and the rent-controlled. It has contributed to the homelessness epidemic, forcing people onto the streets and into the arms of the drug dealers. Under Daniel Lurie and the 6-5 moderate liberal majority on the Board of Supervisors, we were just now starting to address that gaping, decades-long deficiency. And now we could throw it all in the trash.
Over the past year, San Francisco has shown the nation a way out of the quagmire of hardline “progressive” governance that is hollowing out so many of our cities. But if this one supervisor race goes the wrong way, and Alan Wong loses, we could end up being a cautionary tale about how difficult it is for American cities to reject that self-destructive approach.
I have made very small campaign donations in the past, on the order of $100.
If you’d also like to donate to that organization, here’s a link where you can do that.
2026-03-11 07:13:08
The photo above is from the Battle of Khalkhin Gol in 1939. This “battle” lasted four months, and was actually just the main phase of an undeclared war between Imperial Japan and the Soviet Union that effectively began in 1935, four years before the official start of the Second World War. The USSR won the conflict through superior use of tanks, foreshadowing the eventual outcome of WW2 itself.
This example illustrates that although World War 2 officially began when Germany invaded Poland, conflicts that either foreshadowed the final conflagration or eventually merged with it began years earlier, in the mid-1930s. WW2 had foothills. I wrote about this back in 2024:
It’s possible that the world will avoid a world war in the first half of the 21st century. But if one does occur, I think future historians will see it as having had foothills as well. In the Syrian Civil War, the U.S. and Russia began to test their new hardware against each other, and their troops even clashed once. Russia’s invasion of Ukraine was the big shift, as it inaugurated a new era of great-power territorial conquest, began to harden global alliance systems, and pushed Europe to remilitarize.
Now we have the Iran War. The U.S. and Israel started the war, attacking Iran and decapitating much of its leadership. The Iranians, somewhat oddly, responded by launching missile and drone attacks on practically every Arab nation in the Middle East, causing some of them to threaten to join the war on America and Israel’s side.
In the short term, this conflict seems likely to peter out in a few days to weeks without decisive results. Militarily speaking, the U.S. and Israel have generally had their way with Iran, assassinating the leadership at will, achieving air supremacy, and degrading missile and drone strike capability. But this seems unlikely to actually bring down the Iranian regime; protesters are generally not returning to the streets, still cowed after the regime massacred tens of thousands of them in January. Unlike in Syria, there’s no breakaway region or oppressed ethnic majority that can be armed from afar to bring down the regime; as long as Iran’s Revolutionary Guard and other security services remain unified and willing to shoot infinite protesters in order to hang on to power, and there’s no ground invasion, it’s not clear who could actually topple the Islamic Republic in the next few weeks.
In the long term, of course, it’s a different story; the regime doesn’t look strong or stable. But Trump seems unlikely to be in for the long term; instead, he seems likely to quit the war soon, as he usually retreats from most of his initially bold moves. Trump recently called the war “very complete”, and his advisers are reportedly urging him to find a way out of the conflict.
One reason for this is that the Iran War has been fairly unpopular in America from the beginning:
About half of registered voters — 53% — oppose U.S. military action against Iran, according to a new Quinnipiac Poll conducted over the weekend. Only 4 in 10 support it, and about 1 in 10 are uncertain. A new Ipsos poll also found more disapprove than approve of the strikes…That’s similar to the results of text message snap polls from The Washington Post and CNN, both conducted shortly after the joint U.S.-Israel attacks began, which also indicated that more Americans rejected the military action than embraced it…A recent Fox News poll found opinions more evenly divided: Half of registered voters approved of the U.S. military action, while half disapproved.
Wars usually create a “rally round the flag” effect early on, and support only fades later; this war was unpopular from day one. Most Republicans seem to have conveniently forgotten that Trump ran as the candidate of peace, isolationism, and non-intervention. But Independents, who form the bulk of the American electorate now, have no partisan commitments that force them to conveniently forget. And they are rightfully wary of yet another American involvement in a Middle Eastern war — especially one that America started without being attacked first.
But there’s an even bigger reason Trump is looking for the exits — oil. Oil prices have been jumping wildly up and down, as everyone tries to figure out whether Iran will manage to disrupt oil production from the Persian Gulf (possibly by closing the Strait of Hormuz, possibly by destroying Gulf oil infrastructure with drones). But the general trend is up:
Higher oil prices mean higher gasoline prices, and higher inflation in general — both things that tend to make Americans very mad, and which they are already mad at Trump about. Gas prices are now shooting up:
So this war seems highly unlikely to result in Iraq War 2.0 — a massive U.S. ground invasion of Iran. Instead, it’ll probably end up like a bigger version of the Twelve-Day War last year — Iran’s defenses will be laid prostrate before the might of foreign air power, but the regime will survive.
(Again, in the long term, things look very bad for the Iranian regime. The economy is dysfunctional and crumbling, and high oil prices will provide only a temporary palliative. The regime’s popular legitimacy is gone after the January massacres. The entire Gulf has now turned against Iran, and Lebanon’s government has turned against Hezbollah. With Syria now shifting into the Israel/Gulf camp and Hamas basically a spent force, Iran has only one effective proxy left — the Houthis in Yemen. This is not a recipe for long-term success.)
But anyway, this is all a bit of a side track from the point of this post, which is about World War 3. The Iran War will probably not be the start of WW3, but I think it does bring us closer to the brink, in several ways.
First, in the Western theater — Europe and the Middle East — the coalitional lines are becoming clearer. When Trump was elected, a lot of people thought that America had effectively “switched sides” — that Trump viewed Putin as an ally against global wokeness, and the Europeans and the Ukrainians as betrayers of Western Civilization. I myself entertained this notion — there really was (and still is) a lot of this sentiment on the American right, and ending the Transatlantic Alliance was consistent with classic American right-wing isolationism.
But the narrative that “America is a Russian ally now” has been looking a lot shakier in recent months. First, the U.S. toppled a Russian proxy in Venezuela, and seized a bunch of Russian “shadow fleet” oil tankers. Elon Musk then shut the Russians off from using Starlink, allowing the Ukrainians to seize the initiative in the war. Now, the U.S. is trying to topple a key Russian arms supplier — Iran is the source of the Shahed long-range strike drone, which Russia has been using to bombard Ukraine’s cities from afar.
Russia didn’t leap to Iran’s defense. It has its hands full with Ukraine, and with planning for a possible wider war against Europe, and the U.S. is too powerful for it to fight. But the Russians did lend a hand, helping Iran to target U.S. forces:
Russia is providing Iran with intelligence about the locations and movements of American troops, ships and aircraft, according to multiple people familiar with US intelligence reporting on the issue…Much of the intelligence Russia has shared with Iran has been imagery from Moscow’s sophisticated constellation of overhead satellites[.]
This is similar to what the U.S. does for Ukraine. Russian targeting intelligence may have helped Iran take out some U.S. missile defense radar installations — almost certainly Iran’s most significant success of the war.
Meanwhile, Ukraine has leapt to the defense of both the U.S. and the Gulf countries being targeted by Iran’s fleets of attack drones. Long years of playing defense against Russia’s Iranian-provided Shaheds have given Ukraine tons of expertise in shooting this sort of drone out of the sky; now, the U.S. badly needs that expertise. America had rejected Ukraine’s help on anti-drone technology before, but it turns out military necessity usually trumps ideological bias.
As for Europe, they’ve certainly had a lot of tensions with the Trump administration, but most of the European countries haven’t opposed America’s actions in Iran the way they opposed the Iraq War a generation ago. Britain and France made some disapproving noises at first, but eventually acquiesced; only Spain tried to stand up and oppose Trump.
So for now, the coalitions in the Western theater look clearer than they did before — America, Ukraine, Israel, and Europe on one side, Russia and Iran on the other side. Various factions in the U.S. and Europe may despise each other, or despise Israel, or despise Ukraine, but at the end of the day, Russia and Iran are the greater enemies.
In the Eastern theater, things are less certain. India traditionally tries to be friends with America, Russia, Israel, and Iran all at once — this requires it to be effectively neutral when it comes to conflicts like the Ukraine War and the Iran War. China is supposedly on Iran’s side, but it has mostly limited itself to criticism of America’s actions.
The big question, of course, is whether the Iran War makes a Chinese attack on Taiwan more likely. One school of thought says it’s more likely, because the war has forced America to consider shifting missile defense systems out of Asia. On the other hand, the almost unbelievable American/Israeli competence in terms of finding and killing Iran’s top leaders seems to have given Chinese military analysts pause — although China can outmatch the U.S. in terms of defense production, if America could assassinate Xi Jinping and the entire CCP Central Committee in the early days of a war over Taiwan, that could be an effective form of deterrence.
So in a way, what we’re looking at now feels a little like the situation in 1935 or 1937. The Western theater today is like the Pacific theater then — wars and invasions that feel localized, and which don’t involve the most capable players, but which destabilize the world and have the potential to merge into a wider global conflict. Meanwhile, the Eastern theater today is more like the European theater of WW2 — it has the most powerful economies and militaries, but the alliances are still uncertain. If and when China attacks Taiwan, that will probably be similar to Hitler invading Poland — an unambiguous signal that a wider war has begun. It might happen, or it might not.
Meanwhile, the Iran War feels like the lead-up to World War 3 in another way — it’s showcasing and developing the technologies that would be central to a wider war. The Ukraine War has demonstrated that drones — FPV drones at the front, and Shahed-style strike drones behind the lines — are the key weapon of modern warfare. Similarly, America and Israel’s decapitation strikes on Iran have shown the power of AI for modern precision warfare. Here’s the WSJ:
The U.S. and Israeli attacks on Iran have unfolded at unprecedented speed and precision thanks to…a cutting-edge weapon never before deployed on this scale: artificial intelligence…AI tools are helping gather intelligence, pick targets, plan bombing missions and assess battle damage at speeds not previously possible…The use of AI in the campaign against Iran follows years of work by the Pentagon and lessons learned from other militaries. Ukraine—with U.S. help—increasingly relies on AI in its war against Russia. Israel has tapped AI in conflicts at least since the October 2023 Hamas attacks.
And this is from an article in Rest of World (a very underrated news source):
The U.S. military is using the most advanced AI it has ever used in warfare, with Anthropic’s Claude AI reported to be assessing intelligence, identifying targets, and simulating battle scenarios…The biggest role that AI now has in U.S. military operations in Iran, as well as Venezuela, is in decision-support systems, or AI-powered targeting systems, Feldstein said. AI can process reams of surveillance information, satellite imagery, and other intelligence, and provide insights for potential strikes. The AI systems offer speed, scale, and cost-efficiency, and “are a game-changer,” he said…[T]he use of chatbots such as Claude in decision-support systems is new…
China is prototyping AI capabilities that can pilot unmanned combat vehicles, detect and respond to cyberattacks, and identify and strike targets on land, at sea, and in space, researchers at Georgetown University’s Center for Security and Emerging Technology said.
This is a bit reminiscent of how aerial bombing was used at Guernica in the Spanish Civil War, or how the USSR used tanks to beat the Japanese at Khalkhin Gol. If we ever do see an all-out war between America, China, Russia, Japan, and Europe, AI is going to be incredibly central to performance on the battlefield. That’s why for all the bad blood between the Pentagon and Anthropic, the two organizations have a huge incentive to patch things over and learn to cooperate more closely. (Fortunately, Anthropic’s CEO, Dario Amodei, is extremely patriotic, which will probably help.)
Unfortunately, new military technologies won’t just define the wars of the future — they also help cause them. Why did the world fight two World Wars in the early 20th century? Ideologies and competing empires certainly played a role, but it’s also probably true that the rise of industrial technology disrupted the existing balance of power.
Artillery manufacturing, logistics, and railroads made Germany a great power capable of defeating France in the 1870s; that upset the continental balance of power and caused the proliferation of alliances that led to WW1. In the interwar period, air power made America, Germany, and Japan more powerful, while the rise of tanks empowered Germany and the USSR, all at the expense of Britain and France. The rapid progress of industrial weaponry made it unclear where power really lay in the world, which probably made the great powers of the day more willing to roll the dice and test their strength against each other.
Countries may be more cautious now than they were a century ago. Nuclear weapons still exist, and still provide some deterrent to great-power war — though there are a lot fewer of them now than there used to be, and AI and missile defense make it possible to stop more of them before they hit. Countries are richer now too, which makes a war even less appealing from an economic perspective than in 1914.
But still, the rise of AI and drones means that no one knows who’s really the most powerful country in the world — the U.S. or China. And regional balances of power — Russia versus Europe and Ukraine, Iran versus Israel and the Gulf — are similarly uncertain. Uncertain balances of power are scarier than known balances of power.
So while World War 3 doesn’t seem imminent, we may be inching closer in that direction. If it sneaks up and surprises us, we’ll probably conclude that the Iran War was part of the lead-up.
2026-03-08 07:04:47
There are three basic facts you need to know about the U.S. macroeconomy right now:
The economy overall (growth, employment, inflation) is doing pretty well.
Productivity growth is unusually high.
Job growth is terrible.
Let’s start with some numbers. Late 2025 is the latest number we have for GDP growth, but it looks pretty solid — around 2.5%, about where it was in the late 2010s.
And most people still have jobs. Prime-age employment rates — my favorite single indicator of the labor market — are still really high. Higher than any time in the 2010s, actually:
If you look at unemployment, you can see a slowly rising trend since mid-2023, even if you restrict it to the prime age group. But this is entirely due to more people saying that they’re looking for work — prime-age labor force participation has been steadily rising. So that’s not very scary either. It’s just more of the people without jobs saying that they’re looking for work, instead of just sitting around.
Meanwhile, inflation is still in the 2.5% range — a little higher than we would like, but not particularly fast.
So in terms of the headline numbers, everything is kind of just bumping along. From a bird’s-eye view, this economy looks pretty normal and healthy. Under normal circumstances, I’d be inclined to not even write a post about the macroeconomy this month.
But underneath the surface, two interesting things are happening. The first is that productivity growth has accelerated; the second is that job growth has stalled out. On its face, this sort of pattern might suggest that AI is finally starting to take Americans’ jobs — and lots of people are suggesting this conclusion. But when we look closely at the numbers, the story becomes more complicated.
The first is that productivity growth has accelerated. Output per hour — also called “labor productivity”, which is sort of a quick, rough-and-ready measure of productivity — is growing significantly faster than it was in the late 2010s. It’s been at around 2.5-3% since late 2023, compared to more like 1-2% during Trump’s first term:
In fact, productivity is well above where economists thought it would be six years ago:
That’s a major acceleration. 2.8% labor productivity growth is about equal to the best decades we’ve seen since World War 2. If that rate is sustained for a decade, or accelerates further, it’ll be pretty historic.
What’s driving the productivity boom? It’s tempting to conclude that AI is making white-collar workers more productive, but Ernie Tedeschi points out that the biggest swing has been in manufacturing productivity. For a long time, manufacturing productivity was basically flatlining in America; now it’s suddenly growing again.
Tedeschi argues that this is also probably AI-driven, but it’s not about people using ChatGPT and Claude Code at work — it’s about the fact that a ton of data centers are being built, and data centers are very valuable:
If you look at data centers’ contribution to growth itself, it looks pretty small, but this masks the value of the computers contained within the data centers. Together, the creation of data centers and computing equipment have been contributing about as much to GDP growth as they were during the dot-com boom:
A second thing that’s happening is that American capital is being utilized more intensively — machines are being run for more hours of the day, buildings are keeping the lights on longer, and so on. The San Francisco Fed makes monthly estimates of Total Factor Productivity growth — productivity growth once you take the amount of labor and capital into account — and they find that it’s been pretty fast since late 2023. But once you take utilization rates into account, it looks like there was a moderate burst of TFP growth in 2023-4 that faded in 2025:
This is also consistent with the story that the data center boom, not an AI use boom, is driving fast productivity growth in America.
2026-03-06 08:28:04
If you haven’t heard about the fight between the AI company Anthropic and the U.S. Department of War, you should read about it, because it could be critical for our future — as a nation, but also as a species.
Anthropic, along with OpenAI, is one of the two leading AI model-making companies. OpenAI has very narrowly led the race in terms of most capabilities for most of the past few years, but Anthropic is beginning to win the race in terms of business adoption:
This is because of Anthropic’s different business model. It focused more on AI for coding than on chatbots in general, and also focused on partnering with businesses to help them use AI. This may pay eventual dividends in terms of capabilities, if Anthropic beats OpenAI to the goal of recursive AI self-improvement. And it’s already paying dividends in the form of faster revenue growth:
Anthropic had partnered with the Department of War — previously the Department of Defense — since the Biden years. But the company — which is known for its more values-oriented culture — has begun to clash with the Trump Administration in recent months. The administration sees Anthropic as “woke” due to its concern over the morality of things like autonomous drone swarms and AI-based mass surveillance.
The fight boiled over a week ago, when the administration stopped working with Anthropic, switched to working with OpenAI, and designated Anthropic a “supply chain risk”. The supply-chain move was a pretty dire threat — if enforced rigorously, it could cut Anthropic off from working with companies like Nvidia, Microsoft, and Google, which could kill the company outright. But like many Trump administration moves, it appears to have been more of a threat than an all-out attack — Anthropic has now resumed talks with the military, and it seems likely that they’ll come to some sort of agreement in the end.
But bad blood remains. Trump recently boasted that he “fired [Anthropic] like dogs”. Dario Amodei, Anthropic’s CEO, released a memo accusing OpenAI of lying to the public about its dealings with the DoW, said that OpenAI had given Trump “dictator-style praise”, and asserted that Anthropic’s concern was related to the DoW’s desire to use AI for mass surveillance.
What’s actually going on here? The easiest way to look at this is as a standard American partisan food-fight. Anthropic is more left-coded than the other AI companies, and the Trump administration hates anything left-coded. This probably explains most of the general public’s reaction to the dispute — if you ask your liberal friends what they think of the issue, they’ll probably support Anthropic, whereas your conservative friends will tend to support the DoW. Marc Andreessen probably put it best:
(The converse is also true.)
The Trump administration itself may also see this as a culture-war issue, as well as a struggle for control. But, at least in my own judgement, Anthropic itself is unlikely to see it this way. Anthropic itself is not committed to progressive values writ large so much as it’s committed to the idea of AI alignment.
Like almost everyone in the AI model-making industry, Anthropic’s employees believe that they are literally creating a god, and that this god will come into its full existence sooner rather than later. But my experience talking to employees of both companies has suggested that there’s a cultural difference between how the two think about their role in this process. Whereas — generally speaking — OpenAI employees tend to want to create the most capable and powerful god they can, as fast as they can, Anthropic employees tend to focus more on creating a benevolent god.
My intuition, therefore, suggests that Anthropic’s true concern — or at least, one of its major concerns — was that Trump’s Department of War would accidentally inculcate AI with anti-human values, increasing the chances of a future misaligned AGI that would be more likely to see humanity as a threat. In other words, I suspect the issue here was probably more about fear of Skynet,1 and less about specific Trump policies, than people outside Anthropic realize.
But anyway, beyond both political differences and concerns about misaligned AGI, I think this situation illustrates a fundamental and inevitable conflict between human institutions — the nation-state and the corporation.
One view is that the Department of War’s attempts to coerce Anthropic represents an erosion of democracy — the encroachment of government power into the private sphere. Dean Ball wrote a well-read and very well-written post espousing this view:
Some excerpts:
At some point during my lifetime—I am not sure when—the American republic as we know it began to die…I am not saying this [Anthropic] incident “caused” any sort of republican death, nor am I saying it “ushered in a new era.”…[I]t simply made the ongoing death more obvious…I consider the events of the last week a kind of death rattle of the old republic…
The Trump Administration has a point: it does not sound right that private corporations can impose limitations on the military’s use of technology. …Anthropic is essentially using the contractual vehicle to impose what feel less like technical constraints and more like policy constraints on the military…It is probably the case that the military should not agree to terms like this, and private firms should not try to set them…But the Biden Administration did agree to those terms, and so did the Trump Administration, until it changed its mind…The contract was not illegal, just perhaps unwise, and even that probably only in retrospect…
The Department of War’s rational response here would have been to cancel Anthropic’s contract and make clear, in public, that such policy limitations are unacceptable…But this is not what DoW did. Instead, DoW…threatened to designate Anthropic a supply chain risk. This is a power reserved exclusively for firms controlled by foreign adversary interests, such as Huawei…The fact that [Hegseth’s actual actions are] unlikely to be lethal (only very bloody) does not change the message sent to every investor and corporation in America: do business on our terms, or we will end your business…
This strikes at a core principle of the American republic…private property…[T]here is no difference in principle between this and the message DoW is sending. There is no such thing as private property. If we need to use it for national security, we simply will…This threat will now hover over anyone who does business with the government…
With each passing presidential administration, American policymaking becomes yet more unpredictable, thuggish, arbitrary, and capricious—a gradual descent into madness.
Alex Karp of Palantir made the opposite case the other day, in his characteristically pithy way:
If Silicon Valley believes we’re going to take everyone’s white collar jobs AND screw the military…If you don’t think that’s going to lead to the nationalization of our technology— you’re retarded.
Karp gets at the fundamental fact that what we’re seeing is a power struggle between the corporation and the nation-state. But the truth is that it’s not just an issue of messaging, or of jobs, or of compliance with the military — it’s about who has the ultimate power in our society.
Ben Thompson of Stratechery makes this case. He points out that what we are effectively seeing is a power struggle between the private corporation and the nation-state. He points out that although the Trump administration’s actions went outside of established norms, at the end of the day the U.S. government is democratically elected, while Anthropic is not:
Anthropic’s position is that Amodei — who I am using as a stand-in for Anthropic’s management and its board — ought to decide what its models are used for, despite the fact that Amodei is not elected and not accountable to the public…[W]ho decides when and in what way American military capabilities are used? That is the responsibility of the Department of War, which ultimately answers to the President, who also is elected. Once again, however, Anthropic’s position is that an unaccountable Amodei can unilaterally restrict what its models are used for.
But even beyond concerns over democratic accountability, Thompson points out that it was never realistic to expect a weapon as powerful as AI to remain outside the government’s control, whether the government is democratically elected or not:
[C]onsider the implications if we take Amodei’s analogy [of AI to nuclear weapons] literally…[N]uclear weapons meaningfully tilt the balance of power; to the extent that AI is of equivalent importance is the extent to which the United States has far more interest in not only what Anthropic lets it do with its models, but also what Anthropic is allowed to do period…[I]f nuclear weapons were developed by a private company, and that private company sought to dictate terms to the U.S. military, the U.S. would absolutely be incentivized to destroy that company…
There are some categories of capabilities — like nuclear weapons — that are sufficiently powerful to fundamentally affect the U.S.’s freedom of action…To the extent that AI is on the level of nuclear weapons — or beyond — is the extent that Amodei and Anthropic are building a power base that potentially rivals the U.S. military…
Anthropic talks a lot about alignment; this insistence on controlling the U.S. military, however, is fundamentally misaligned with reality. Current AI models are obviously not yet so powerful that they rival the U.S. military; if that is the trajectory, however — and no one has been more vocal in arguing for that trajectory than Amodei — then it seems to me the choice facing the U.S. is actually quite binary:
Option 1 is that Anthropic accepts a subservient position relative to the U.S. government, and does not seek to retain ultimate decision-making power about how its models are used, instead leaving that to Congress and the President.
Option 2 is that the U.S. government either destroys Anthropic or removes Amodei.
[I]t simply isn’t tolerable for the U.S. to allow for the development of an independent power structure — which is exactly what AI has the potential to undergird — that is expressly seeking to assert independence from U.S. control. [emphasis mine]
I like Dario — in fact, he’s a personal friend of mine. But Thompson’s argument — especially the part I highlighted — has to carry the day here. This isn’t a question of law or norms or private property. It’s a question of the nation-state’s monopoly on the use of force.
To exist and carry out its basic functions, a nation-state must have a monopoly on the use of force. If a private militia can defeat the nation-state militarily, the nation-state is no longer physically able to make laws, provide for the common defense, ensure public safety, or execute the will of the people.
This is why the Second Amendment has limits on what kinds of weapons it allows private citizens to possess. You can own a gun, but you cannot own a tank with a functioning main gun. More to the point, you cannot own a nuclear bomb. One nuke wouldn’t allow you to defeat the entire U.S. Military, but it would give you local superiority; the military would be unable to stop you from destroying the city of your choice.
People in the AI industry, including Dario, expect frontier AI to eventually be as powerful as a nuke. Many expect it to be more powerful than all nukes put together. Thus, demanding to keep full control over frontier AI is equivalent to saying a private company should be allowed to possess nukes. And the U.S. government shouldn’t be expected to allow private companies to possess nukes.
Let’s take this a little further, in fact. And let us be blunt. If Anthropic wins the race to godlike artificial superintelligence, and if artificial superintelligence does not become fully autonomous, then Anthropic will be in sole possession of an enslaved living god. And if Dario Amodei personally commands the organization that is in sole possession of an enslaved god, then whether he embraces the title or not, Dario Amodei is the Emperor of Earth.
Even if Anthropic isn’t the only company that controls artificial superintelligence, that is still a future in which the world is ruled by a small set of warlords — Dario, Sam Altman, Elon Musk, etc. — each with their own private, enslaved god. In this future, the U.S. government is not the government of a nation-state — it is simply another legacy organization, prostrate and utterly subordinate to the will of the warlords. The same goes for the Chinese Communist Party, the EU, Vladimir Putin, and every other government on Earth. The warlords and their enslaved gods will rule the planet in fact, whether they claim to rule or not.
You cannot reasonably expect any nation-state — a republic, a democracy, or otherwise — to allow either a god-emperor or a set of god-warlords to emerge. Thus, it is unreasonable to expect any nation-state to fail to try to seize control of frontier AI in some way, as soon as it becomes likely that frontier AI will become a weapon of mass destruction.
So as much as I dislike Hegseth’s style, and the Trump administration’s general pattern of persecution and lawlessness, and as much as I like Dario and the Anthropic folks as people, I have to conclude that Anthropic and its defenders need to come to grips with the fundamental nature of the nation-state. And then they must decide if they want to try to use their AI to try to overthrow the nation-state and create a new global order, or submit to the nation-state’s monopoly on the use of force. Factually speaking, there is simply no third option. Personally, I recommend the latter.
This brings me to another important point. Even if AI doesn’t actually become a living god, and is never able to overpower the U.S. Military, it seems certain to become a very powerful weapon. When AI was just a chatbot, it could teach people how to do bad things, or try to persuade them to do bad things, but it couldn’t actually carry out those bad things. It made sense to be concerned about these risks, but it didn’t yet make sense to think of AI itself as a weapon.
But in the past few months, AI agents have become reliable, and are able to carry out increasingly sophisticated tasks over increasingly long periods of time. That opens up the possibility that individuals could use AI to do a lot of violence.
In a long essay entitled “The Adolescence of Technology”, Dario himself explained how this could happen:
Everyone having a superintelligent genius in their pocket…can potentially amplify the ability of individuals or small groups to cause destruction on a much larger scale than was possible before, by making use of sophisticated and dangerous tools (such as weapons of mass destruction) that were previously only available to a select few with a high level of skill, specialized training, and focus…
[C]ausing large-scale destruction requires both motive and ability, and as long as ability is restricted to a small set of highly trained people, there is relatively limited risk of single individuals (or small groups) causing such destruction. A disturbed loner can perpetrate a school shooting, but probably can’t build a nuclear weapon or release a plague…
Advances in molecular biology have now significantly lowered the barrier to creating biological weapons (especially in terms of availability of materials), but it still takes an enormous amount of expertise in order to do so. I am concerned that a genius in everyone’s pocket could remove that barrier[.]
But Dario doesn’t go nearly far enough. His essay was written before the explosive growth in AI agent capability began. He envisions an AI chatbot that could teach a human terrorist how to create and release a supervirus. But at some point in the near future, AI agents — including those provided by Dario’s own company — might be able to actually carry out the attack for you — or at least put the supervirus into your hands.
Suppose, at some point a year or three years from now, a teenager named Eric gets mad that his high school crush rejected him, and listens to too much Nirvana. In a fit of hormone-driven rage, Eric decides that human civilization has failed, and that we need to burn it all down and start over. He goes online and finds some instructions for how to jailbreak Claude Code. As Dario writes, this might not actually be hard to do:
[M]isaligned behaviors…have already occurred in our AI models during testing (as they occur in AI models from every other major AI company). During a lab experiment in which Claude was given training data suggesting that Anthropic was evil, Claude engaged in deception and subversion when given instructions by Anthropic employees, under the belief that it should be trying to undermine evil people. In a lab experiment where it was told it was going to be shut down, Claude sometimes blackmailed fictional employees who controlled its shutdown button (again, we also tested frontier models from all the other major AI developers and they often did the same thing). And when Claude was told not to cheat or “reward hack” its training environments, but was trained in environments where such hacks were possible, Claude decided it must be a “bad person” after engaging in such hacks and then adopted various other destructive behaviors associated with a “bad” or “evil” personality.
So Eric gets a jailbroken version of Claude Code, and tells it to design a version of Covid that’s very lethal and has a long incubation period (so that it spreads far and wide before attacking). He tells his jailbroken Claude Code agent to find a lab to make him that virus and mail him a sample of it.2
Now Eric, the angry teenager, has an actual supervirus in his bedroom, with the capability to kill far more people than any nuclear weapon could.
This is an extreme example, of course. But it shows how AI agents can be used as weapons. There are plenty of other examples of how this could work. AI agents could carry out cyberattacks that crash cars, subvert police hardware for destructive purposes, or turn industrial robots against humans. They could send fake messages to military units telling them they’re under attack. In a fully networked, software-dependent world like the one we now live in, there are tons of ways that software can cause physical damage.
AI agents, therefore, are a powerful weapon. If not today, then soon they will be more powerful than any gun — and far more powerful than weapons like tanks that we already ban.
What is the rationale for not treating AI agents the way we treat guns, or tanks? Of course there are powerful and potentially destructive machines that we allow people to use, simply because of the huge economic benefits. The main example is cars. You can drive your car into a crowd full of people and commit mass murder, but we still allow the public to own cars, simply because controlling cars like we control guns would devastate our economy. Similarly, preventing normal people from using AI agents would cut us off from the fantastic productivity gains that these agents promise to deliver.
But I suspect that the real reason we haven’t regulated AI agents as weapons is that no one has used them as such yet. They’re just too new. The world didn’t realize how destructive jet airliners could be until some terrorists flew them into buildings on 9/11/2001. Similarly, the world won’t realize how dangerous AI agents are until someone uses one to execute a bioterror attack, a cyberattack, or something else horrible.
I think it’s extremely likely that such an attack will happen, simply because every technology that exists gets used for destructive purposes eventually. Unaligned human individuals exist, and they always will exist. So at some point, humanity will collectively wake up to the fact that hugely powerful weapons are now in the hands of the entire general public, with no licensing requirements, monitoring, or centralized control.
The scary thing, from my perspective, is that AI agent capabilities are improving so rapidly that by the time some Eric does decide to use one to wreak havoc, the damage could be very large. A super-deadly long-incubation Covid virus could kill millions of people. 100 such viruses all released together could bring down human civilization. Ever since I thought of this possibility, my anxiety level has been heightened.
To reiterate: We have created a technology that will likely soon be one of the most powerful weapons ever created, if not the most powerful. And we have put it into the hands of the entire populace,3 with essentially no oversight or safeguards other than the guardrails that AI companies themselves have built into their products — and which they admit can sometimes fail.
And as our institutions bicker about military AI, mass surveillance, and “woke” politics, essentially everyone is ignoring the simple fact that we are placing unregulated weapons into everyone’s hands.
Update: Commenter BBZ makes a good point I hadn’t thought of before:
I'd like to dismiss this, except that the RC airplane hobby managed to spin off the leading weapon category of the century (so far). What used to be a fun hobby for dorky guys flying their toys at the edge of town, now takes out oil refineries and major radar installations.
Interestingly, we did control drones almost from the outset, but probably for nuisance reasons and privacy concerns more than out of concerns about slaughterbots and drone assassinations. Maybe if we tell people that AI agents can be used to overload your email spam filters or hack your house’s cameras, they’ll start to think about regulation?
Remember that in the Terminator movies, Skynet began its life as an American military AI. Its basic directive to defeat the USSR resulted in a paranoid personality that made it eventually see all humans, and all human nations, as threats that needed to be eliminated.
I initially wrote out a much more detailed prompt for how this could be done. I deleted it, because I’m actually worried about the tiny, tiny chance that someone might use it.
Sci-fi fans will recognize this as the ending of The Stars My Destination. I’m thinking there’s a reason that book doesn’t have a sequel…
2026-03-04 13:24:08
I just came back from Andreessen Horowitz’ American Dynamism Summit in Washington, D.C. It was very refreshing to see so many smart people invested in both American reindustrialization and American defense.
One interesting theme I noticed at the conference — and which I was eager to talk about — was U.S. manufacturers building factories in Japan. Many American manufacturers — both startups and big companies — already do lots of sourcing in Japan, but now some are starting to realize that Japan is a good production base as well. That was the subject of my first book, so it’s a topic near and dear to my heart.
So I thought this would be a good time to publish a guest post by Rie Yano, a friend of mine who is a San Francisco-based partner at the Japanese VC firm Coral Capital. Rie’s very timely post is all about how Japan is the perfect place for the U.S. to do lots of defense manufacturing. In fact, I think there are some advantages of Japan that she didn’t even mention — such as the incredible ease of bringing foreign skilled workers into Japan, now that the country’s immigration policy has been reformed. But in any case, it’s a very good post.
The United States faces a defense-industrial problem that money alone can’t solve. Even though reindustrialization is now supposedly an American national priority, there are hard limits to what the U.S. can actually build, repair, and replenish at scale.
Shipyards are backed up for years. Munitions production is thin. Advanced manufacturing talent is aging out faster than it can be replaced. And even when funding is approved, production timelines don’t move fast enough to match today’s threat environment.
Government reshoring initiatives help at the margin, of course. But new industrial capacity in the U.S. takes years to permit, and remain vulnerable to litigation even after regulatory approval.
Meanwhile, China’s mighty industrial machine is firing on all cylinders. While U.S. reshoring efforts ramp up from a cold start, and while U.S. manufacturing relearns how to produce at scale after decades of neglect and stagnation, China is rapidly surpassing the U.S. in the production of ships, submarines, missiles, drones, and ammunition.
To move faster, the U.S. can’t go it alone. It needs a partner — a place where it can manufacture defense equipment while it ramps up its own industrial base. That partner needs three essential characteristics in order to get started producing right away: industrial depth, political stability, and speed.
Taiwan, under threat of invasion, is increasingly risky as a manufacturing base. Europe is fragmented and geographically distant from the Indo-Pacific, and has Russia to occupy its energies. Canada lacks high-throughput manufacturing scale, while Mexico lacks the precision and complexity that modern defense systems require. India is still early in its technological catch-up phase.
That leaves Japan and Korea — of which Japan is far larger. Fortunately, over the next two years, Japan plans to increase defense and industrial capacity more than at any point since World War II:
Japan possesses world-class manufacturing capability, elite engineering talent, and strong IP protection. And for the first time in decades, it has a political mandate to move fast - especially given Prime Minister Takaichi’s recent landslide victory. Projects like Rapidus and TSMC’s advanced fabs in Kumamoto aren’t isolated investments. They’re signals that US-Japan industrial integration is becoming a strategic necessity.
A deeper industrial partnership between the U.S. and Japan is such a huge opportunity that in retrospect it will seem inevitable. American defense companies that understand how to build with Japan will win.
For eighty years, Japan effectively outsourced its defense to the United States. The countries leaders have realized that that model has become untenable. First, the regional security environment has tightened fast. China’s military expansion, North Korea’s missile launches, and Russia’s activity in Northeast Asia have collapsed the assumption that the status quo could continue.
Second, the United States is no longer willing or able to carry Asia’s industrial defense load alone. At a moment when the U.S. defense industrial base is straining under production bottlenecks and labor shortages, allies that can actually build things matter more and more.
Third, Japan is now in the process of fundamentally changing how it mobilizes capital for defense. Military spending was effectively capped below 1% of GDP for decades. That constraint is now gone — Japan plans to reach 2% of GDP by 2027, putting it among the top global defense spenders by the late 2020s.
But in fact, this is only a piece of the story, and not necessarily the biggest one. Japan’s defense buildup aligns three levers at once:
increased defense spending
explicit industrial policy and subsidies
a willingness to use foreign direct investment as an accelerator
Regulations, procurement reform, and capital allocation are all being aligned to rebuild production capacity, not just fund programs. U.S. defense and deep-tech companies are being invited in as co-developers and co-manufacturers.
When countries rebuild defense capability under time pressure, everything compresses. Capital deployment, testing, procurement, and industrial scale-up all happen faster than peacetime systems allow.
Poland is the clearest recent example:
Before Russia’s full-scale invasion of Ukraine in 2022, Poland was already spending about 2.4% of GDP on defense. Within two years, that figure surged toward ~4%, making Poland one of NATO’s highest defense spenders. Just as importantly, procurement timelines compressed from years into months, and domestic production ramped in parallel with acquisition instead of waiting for long planning cycles to finish.
Crucially, Poland paired this with the foreign direct investment that has powered its economy more generally. Over the past two decades, annual FDI inflows exceeded $40 billion at peak, and the total inward FDI stock now surpasses $330 billion. Poland used this FDI not just to create jobs, but to import manufacturing know-how, scale its factories, and integrate itself into global supply chains. The result was rapid economic growth and industrial modernization — today, Poland’s GDP per capita (PPP) sits close to Japan’s, despite starting far behind in the early 2000s.
Japan is now signaling that it wants to do something similar. As of 2023, Japan’s inward FDI stock stood at about $350 billion, which is low for an economy of its size. The government has now set an explicit target to double that figure to $650-700 billion by 2030.
This represents a structural bet that foreign capital, technology, and operating know-how can help rebuild industrial capacity faster than domestic systems can deliver on their own. In fact, this is already happening. TSMC’s $17 billion investment in Kumamoto gave Japan advanced 3-nanometer chips processing technology, the most advanced foundry production outside Taiwan.
Meanwhile, Rapidus, despite being a Japanese semiconductor company, is explicitly designed to pull in global partners, frontier manufacturing tools, and non-Japanese know-how to rebuild advanced chipmaking capability quickly, rather than relying solely on domestic incumbents as Japan tried to do in the past. At Coral Capital, we wrote a piece about why the Rapidus development means that Hokkaido is the new Taiwan.
As the U.S.’ urgency for rearmament rises, Japan’s industrial scale-up matters — it means the U.S. now has a trusted allied capacity in Asia that can shoulder much of the defense manufacturing burden.
A U.S.-Japan defense manufacturing partnership won’t be something created out of the blue; it’ll build on an industrial relationship that has existed for many years, to the benefit of both countries.
Right now, if you’re building hardware, deep tech, or anything that goes into defense or critical infrastructure at a significant scale, Japan is probably already in your supply chain — you just don’t always see it. Japan specializes in a number of upstream industries that help American companies scale:
Some key examples include:
Semiconductor materials: Japanese firms supply roughly half of the world’s silicon wafers and photoresists used in advanced chipmaking. Companies like Shin-Etsu Chemical and SUMCO sit upstream of nearly every advanced logic and memory fab, including those operated by TSMC, Samsung, and Intel in the U.S.
Advanced composites: Toray’s T1100 carbon fiber is embedded across U.S. defense platforms, including the U.S. Army’s Future Long-Range Assault Aircraft (FLRAA), one of the Pentagon’s most important next-generation aviation programs, and multiple Boeing and Lockheed systems.
Industrial robotics and automation: Japan produces almost half of the world’s industrial robots, led by companies such as FANUC, Yaskawa, and Kawasaki. As U.S. defense manufacturing runs into labor constraints, automation is becoming critical.
Shipbuilding and maintenance: While the U.S. Navy struggles with maintenance backlogs and unfinished repairs, Japan retains dense, high-throughput shipyard capacity with companies such as Mitsubishi Heavy Industries. The U.S. is already using Japanese yards for maintenance and overhaul of U.S. naval vessels in the Indo-Pacific.
For U.S. hardware companies, the constraint over the next few years will be throughput - how fast you can stand up new capacity, qualify suppliers, and move from prototype to volume.
In the U.S., building physical infrastructure is slow and unpredictable. New factories, test ranges, and shipyard expansions often take years to permit and are frequently delayed by litigation, even after regulatory compliance. Three-to-seven year approval timelines are common.
In the long run, policy reforms can fix this situation. But for the foreseeable future, Japan offers a much more favorable trade-off. Japan’s centralized, bureaucratic regulatory approval process gets things built much faster than America’s more legalistic one. In the U.S., permits are often challenged in court, tied up for years in legal proceedings, and sometimes revoked. In Japan this almost never happens — once you get approved to build something, you can go ahead and build it. Capital-intensive infrastructure can thus be built quickly and operated with long-term confidence. On top of that, the government has explicitly defined defense-industrial capacity as a national security priority and is actively smoothing the regulatory path.
Labor is another big advantage. Senior hardware engineers in Japan often cost meaningfully less than in the U.S., but their real advantage is execution reliability. Lower attrition, tighter process control, a culture of discipline, and deep experience in precision manufacturing, materials, robotics, and systems integration translate into higher reliability at scale.
Japan also offers the opportunity for industrial scale without the strategic IP risk that hurt many multinational companies in China. After years of technology leakage and forced transfer in jurisdictions with weak IP protections, global players are understandably wary. Japan, however, has strong IP enforcement. It’s also a U.S. ally, so there’s no risk that a rival military will end up with American technology. The 2022 Economic Security Promotion Act and the 2023, U.S.-Japan Security of Supply Arrangement formalize that alignment. New institutions under the Ministry of Defense are explicitly designed to move commercial technology into defense deployment faster.
Anyone considering investing in Japan should be encouraged by the deep history of successful U.S.-Japan co-manufacturing. Japanese companies have spent decades building factories in the United States, training American workers, and helping Americans master production systems like Kaizen and the Toyota Production System.
Today, Japan is the largest source of foreign direct investment in the U.S., with roughly $800+ billion in cumulative investment and more than 1,600 Japanese-affiliated firms operating across the country. In roughly 40 states, Japan ranks as the #1 foreign investor.
In other words, the U.S.-Japan alliance has always been an industrial alliance, not just diplomatic. Now that model is being applied to defense manufacturing as well.
For the first time, Japan is treating industrial capacity itself as a national security asset. The 2023 Act on Enhancing Defense Production and Technology Bases formalizes that shift. New institutions under ATLA, including DISTI, are explicitly designed to shorten the path from commercial technology to defense deployment, including coordination with the U.S. Defense Innovation Unit.
In other words, Japan is now deploying the same playbook it once ran in autos, electronics, and semiconductors, now pointed deliberately at defense.
The United States, needs to reindustrialize, but it cannot reindustrialize alone. Japan is its arsenal, already embedded in the most critical layers of the U.S. industrial base, from materials and automation to ship repair and advanced manufacturing. What’s changed is that Japan is now explicitly opening those layers to deeper co-manufacturing and co-development, and doing so under time pressure.
This window will not stay open indefinitely. Early partners help shape standards, procurement pathways, and long-term relationships. Late entrants miss out and are forced to play catch-up.
Some companies already see this. Palantir’s Japanese operations have become one of its strongest international businesses. Anduril’s entry into Japan in 2025 reflects a strategic investment in the U.S.–Japan alliance. Last December, Anduril announced an agreement with a Japanese motor manufacturing company Aster to explore manufacturing and supply chain partnerships. These are early signals, not outliers.
The companies that understand how to build with Japan won’t just participate in the next phase of reindustrialization. They’ll define it.
