2025-07-11 03:10:52
In the previous article, we saw how China exported goods like silk, porcelain, and tea to the West for thousands of years without wanting other goods in exchange. They were content receiving just money in exchange. Remember this from that article:
From 1500 to 1800, Bolivia and Mexico’s mines produced about 80% of the world's silver; 30% of that eventually ended up in China!
But why? Why spend so many centuries manufacturing stuff to only get money in return?
The Chinese government’s obsession with money is thousands of years old, and for good reason. Unique pressures pushed the Chinese to first use shells as currency, then invent the first coins, the first paper money, move to silver, back to paper money, actively drive trade surpluses to hoard silver, and eventually cause the direct fall of at least two empires. What were those pressures? Why did they affect China so much?
That’s what we’re going to explore today.
The first currency to be widely used in China was cowrie shells.
Shells have some positives:
They’re durable, so your money is not going to break into pieces.
There’s not an infinite amount of them: If people just used stones, anybody could create money and that money would be worthless.
They look broadly the same, there’s not a massive difference between two shells that would grant a higher price for it.
They’re reasonably easy to transport from one place to another.
But also some negatives, like for example:
You can’t divide shells into smaller pieces (if you break them, they’re just useless broken shells), or aggregate them into bigger pieces.
Shells were obtained from very far away, which made it hard for new shells to reach China, and this meant instability: What if for a long time no shells arrive? The economy grinds to a stop.
If some very entrepreneurial person figures out a way to harvest tons of shells, they can instantly become rich, but the massive amount of shells injected into the economy means suddenly people wouldn’t accept them as currency. Why would you sell your hard-earned wheat for some shells when there are millions of them entering the market?
Here, we’re starting to see that a good currency has some important features:
You must have enough currency for everybody to buy and sell stuff with it. If it’s not widely available, people will hoard what little there is to store their wealth, and the currency will become even scarcer. At some point there won’t be enough circulating for people to buy and sell, and they’ll have to resort to bartering, debt, or alternative currencies, all of which severely impact trade, and hence, the economy.
For example, when the Romans left Britain, the supply of bronze, silver, and gold money disappeared. Over time, the local economy lost the currency it needed to function, and people had to fall back to bartering or keeping track of debts for their exchanges.
Conversely, too much currency is also a problem. If it’s too easy to produce, you’re going to have counterfeiting and hyperinflation. So a currency needs to have just the right amount of scarcity: not too much that it’s rare, but enough that it’s not flooding the market. This usually means that supply must be controlled or be naturally scarce to prevent inflation, loss of value, or hoarding. Often, this also means it must be backed by an issuing authority (central bank) with credible monetary policy.
For example, paper money is easy to print for anybody who has a printer, so historically, paper money can be counterfeited, and this fake money can flood the market. More commonly, the government can overprint money, making it worthless. This has happened in virtually every hyperinflation of the last century or so, and some argue that it’s happening today with dollars. As we will see, this was crucial in China’s history.
A key feature of currency is that it can convey the price of goods over time and space, so that you know the equivalence between one good and another, like how many kg of wheat are equivalent to a cow. But for that you need the currency to be stable: If its value fluctuates wildly, you won’t know the cost of every good, and this will make people nervous, either hoarding the currency or getting rid of it as fast as they can. It will undermine the currency’s role as a store of value or unit of account.
This is one of the concerns about Bitcoin as a currency: Its value swings widely.
What if your gold coin is worth one pig, but you just need one chicken, which costs maybe a quarter of a gold coin? If you can easily cut the gold coin into 4 pieces, it will be more valuable than if it must remain intact.
So for example, shells were not great currency because they were not divisible: If you break them, you can’t put them back together, so the value simply vanishes. Meanwhile, you can cut a piece of metal in two, and still have two halves. You can mint them into a new coin if you want. Metal’s divisibility is good.
If your money can break, oxidize, or simply disappear, that’s not good money. It must be durable.
That’s why paper money was bad, as notes could break easily, even just by getting wet. Same thing for shells, which could shatter or be crushed. It’s also why perishable food is a horrible currency, and why grain could be used as currency more easily than fruit.
A currency must be easy to carry or transfer. If it’s too heavy or voluminous, you can’t easily move it around.
This is one of the big drawbacks of metal money, and why metals like gold, which were more valuable per gram, were preferable to others like iron: Iron is not scarce, so its value is low compared to its weight. Iron also has a durability issue: It rusts, while gold doesn’t.
Currency is fungible when each unit is identical in value and interchangeable with another of the same denomination (e.g., one $10 bill = any other $10 bill).
Imagine a time when people had to handle coins of different metals, sizes, and weights. They had to weigh each coin and value each coin differently, dramatically increasing transaction costs. If you know that every coin is exactly the same, you can just look at them and know how much value they represent.
Effective currency is universally accepted within the economy where it circulates. Usually, that means it’s backed by trust, government decree (fiat), or intrinsic value (e.g., gold).
People accept US dollars around the world because everybody else does, and because the US government says: “I accept dollars as a way to pay me, and I will forever.” People trust the US will be around for a long time. But many don’t accept Bitcoin or Ethereum yet, simply because others don’t, either.
So why did the Chinese obsess over silver so much? How did they end up prioritizing that type of currency over all others?
According to our factors, shells are not that great as currency:
Since China has always had a huge population, which grew earlier there than in most other regions, it quickly needed a better alternative:
The solution was… knives!
It’s unclear how knives became money. My guess: Knives were intrinsically valuable, and unlike shells, they were available (there are knives around, and more can be made as long as there’s metal), scarce (there aren’t infinite amounts of metal), and durable (especially if they were made of bronze). Once people started using them as a means of exchange, they standardized them, making them fungible, and eventually knives as currency became acceptable and stable, too.
The problem is that they were not divisible and were hardly portable.
Low portability came from the weight of the bronze. As for divisibility, bronze is divisible, which made it a reasonably good metal to use, but bronze in the shape of a knife was not as divisible.
So the obvious next step is to replace knives with something:
More portable
More divisible, which means different sizes representing different amounts of money. That way small and big transactions can be facilitated with different denominations.
Enter cash coins.
Cash coins could have different standardized sizes to represent different amounts of value, solving the knives’ main issue of divisibility. The standardization and centralization of supply is important, because then you can know the exact amount of precious metal you are getting in a coin. If you have coins of different sizes and different purity, you lose this.
And of course, many of the coins were smaller than knives, so they solved the problem of portability for small transactions.
You’ll notice that they have a hole in the middle. Why?
2025-07-08 20:03:08
Westerners fear their chronic trade deficits with China: How long will they last? What happens when the West owes China so much they can’t repay the debt? How should we understand the current trade war between the US and China?
What we don’t realize is that this isn’t the first time this has happened. We need only look at History: The West has had deficits with China for over 2,000 years, and they have had a massive impact on world history, from the opening of global trade routes, to the establishment of colonies, colonial policies, international wars, the emergence of nation-states, the politics of present-day China and the US…
So today, we’re going to take a fascinating trip across four commodities that drove the history of the world: silk, porcelain, tea, and opium.
Here’s how much Romans loved luxury goods:
India, China and the Arabian peninsula take one hundred million sesterces1 from our empire per annum at a conservative estimate: that is what our luxuries and women cost us—Pliny the Elder, Natural History (77–79 AD).
Of these, silk was the biggest import from China. In 14 AD the Senate prohibited the wearing of silk by men!
To pay for it, Romans traded glassware, amber, wine, carpets, and other goods,2 but they didn’t make up for the value of what Romans bought from China. And in general, Chinese traders preferred money—mostly gold and silver—over other goods. Here’s the chronicler Solinus, writing in the 200s AD about the Silk Road:
From the beginning of the [Caspian Sea] coast, we found deep snows, long deserts, cruel people and places, cannibals and the most terrible wild beasts, which make this half of the road practically impassable. After [...] crossing vast uninhabited regions, the first people we hear about are the “Seres” [Chinese]; they sprinkle water on the leaves of certain trees, to make them humid so to produce a substance that will turn into skeins similar to cotton. This is called “sericum” [silk], which we know and use, which awakens a passion in women for luxury, and with which even our men dress now, leaving their bodies on display.
The “Seres” are civilized and peaceful people, but avoid contact with other people, refusing to trade with other nations. Every time they cross the river and out of their country to do business, they do not use their language, or talk; they make an estimate with a look, and stipulate a price. They prefer, by the way, only to sell their products, but do not like to buy our goods.3
The European and Middle Eastern appetite for silk was so huge that Europeans obsessed about producing silk locally, but they didn’t know how to make it and didn’t have silkworms: China had protected its near-monopoly on silk for many centuries thanks to imperial orders to execute anybody caught trying to export silkworms or their eggs. The only way to succeed was by stealing them, and that’s precisely what two Christian monks did around 550 AD, risking their lives to smuggle silkworms hidden inside their canes.
This started silk production in the Eastern Roman Empire, which would slowly permeate through the rest of Europe.
This might have been the first time Chinese manufacturing prowess caused a trade imbalance in the West that required political intervention, but it wasn’t the last.
It’s not a coincidence the English call porcelain “china”.
The Chinese had been perfecting porcelain for thousands of years to make it thin, strong, and resonant. No other civilization could replicate this for a very long time.
But porcelain could only start reaching Europe in the 1500s,4 which is not a coincidence either: Porcelain was too heavy and fragile for overland routes, so it needed a maritime route to reach Europe. The Portuguese found a path to the Indies circumventing Africa just around 1500. It was very much their goal to bring back luxury goods to Europe, after the Ottomans had conquered Constantinople in 1453 and closed the Silk Road to Europeans.
Chinese porcelain was so much thinner, whiter and more translucent than local wares that European nobility really prized it. Its high price and scarcity were a core part of its success, too, as it gave its owners status. The most famous was the white and blue porcelain:
But there were many types, and European nobles loved hoarding them.
Of course, the high price porcelain commanded became an incentive for Portuguese merchants to increase its import. The Dutch copied them and started trading porcelain with China, too. Soon followed the English, the French, and even the Swedes—any European country with access to the Atlantic, really. Spain did the same, but via the Pacific Ocean.
Here’s a fascinating detail: You know how nowadays Westerners design some products and then they send those designs to China for manufacture?
Porcelain is another example of China manufacturing products that Europeans craved, but again it didn’t need anything Europeans produced. Except for silver. So silver flowed from Europe to China. From 1500 to 1800, Bolivia and Mexico’s mines5 produced about 80% of the world's silver; 30% of that eventually ended up in China!
Europeans hated that flow, as the silver disappeared as fast as it was produced, so they tried to stop it. Of course, the most incentivized were the countries who didn’t have access to either silver or trade with China. This is why the Italians tried to copy porcelain in the late 1500s with Medici porcelain, although they largely failed. By the early 1700s, Germans succeeded. A few years later, in 1712, the French Jesuit father Francois Xavier d'Entrecolles published the secrets of porcelain making in Europe, which he had read about and witnessed in China. In the following decades, the local production of porcelain increased and the import of Chinese porcelain fell.
But look at what happened with tea:
It started arriving in Europe in the 1600s, and by the 1700s it had become a craze, especially in Britain and its American colonies.6
The more demand for tea increased, the more its price dropped, and the more people across the empire could afford it and consumed it, which increased the overall British spend on tea.
This trade grew so much that it became a matter of political importance. Remember: It was a tea taxation incident that sparked the American Revolution. From Lewis Dartnell’s book Origins:
The British East India Company endeavoured to supply American demand, but by the late 1760s, most of the leaves consumed in the colonies were smuggled Dutch tea, encouraged by American patriots against British taxation. To undercut the price of smuggled tea, the British parliament passed the Tea Act in 1773. This allowed the company to ship tea directly from China to America, without having to pay British import duty, and granted them a monopoly on the sale of tea in America. The tea was subject to tax only in the colonies. The colonists, however, viewed this as an attempt to foist British taxes on them. They harassed East India Company consignees, refused to accept the tea and left it to rot on the dockside, or prevented the East Indiamen from landing the product. One of the most public–and famous–displays of rebellion flared in Boston Harbour, where in December 1773 protestors boarded the ships and destroyed over 340 chests full of tea by dumping them over the sides into the harbour waters. This Boston Tea Party triggered similar acts of rebellion in other ports, including New York. The situation escalated with parliament in 1774 passing the Coercive Acts–or the Intolerable Acts, as they were known in America–designed to make an example by punishing the defiance of Massachusetts, stripping the colony of self-governance and forcing the closure of Boston Harbour until the ruined cargo had been paid for. But these harsh reprisals only served to unite the colonies against the king, and tensions continued to mount until the War of Independence erupted the following spring.
The Boston Tea Party destroyed China-grown tea bought with Spanish-American silver because of British taxes.
Back in Britain, tea’s ever-escalating trade imbalance with China became a serious economic problem, so much so that the British King George III sent an envoy to the Chinese Emperor to ask for more trade liberalization. These are excerpts of the Emperor’s response:
Our Celestial Empire possesses all things in prolific abundance and lacks no product within its own borders. There is therefore no need to import the manufactures of outside barbarians in exchange for our own produce. But as the tea, silk and porcelain which the Celestial Empire produces, are absolute necessities to European nations and to yourselves, we have permitted, as a signal mark of favor, that foreign merchants should be established at Canton, so that your wants might be supplied and your country thus participate in our beneficence.7
So what did the British do to solve the trade imbalance? Two things. One is that the East India Company sent Scottish botanist Robert Fortune to China to purchase and export Chinese tea plants in the 1850s. This kick-started tea production in India, which grew over the following decades, reducing the share of Chinese tea consumed. Here we have, for the third time, a smuggling of Chinese production know-how to reduce trade imbalances.
The other thing that the British did was introduce opium.
When the British conquered India8 in the late 1700s, they were very conscious about their trade imbalance with China, so they looked for any way to reduce it. They found the right tool in opium. They devised a plan to produce it in India and sell it in China. So the British drove local farmers in eastern India out of crop production and into poppies, from which opium is derived.
Then, the British introduced opium smoking in China.9
Initially, it was considered a medicine. It was the only available pain-killer. Then, it spread among the cool and rich. From there, it spread to the rest of society. Of course, many of those who tried it became addicts.
It took off.
The Emperor Jiaqing noticed all this so he published an edict to stop it in 1810:
Opium has a harm. Opium is a poison, undermining our good customs and morality. Its use is prohibited by law.
But the government couldn’t enforce it. When the Chinese government finally cracked down on opium in 1839, the opium trade was paying for all the tea trade and then some, so the British reacted to protect the trade and attacked China; this was the First Opium War.
Britain won and bent China's arm: It would be allowed to sell opium in China. It also took over Hong Kong.
There would be another Opium War, after which the British, and then other Westerners10 could reach far inland in China to sell opium. The deficit to China became a surplus. Over the following decades, opium addiction became widespread. By 1949, 4.4% of Chinese people were addicted. Local farmers replaced their crops with opium. Governments used opium taxes to finance themselves, and this lasted until the Communist Party had a strong enough chokehold on society and culture to finally ban opium.
This is what the Chinese call the century of humiliation, when China went from the richest and most advanced nation of the world to a dirt poor backwater.11
This has many repercussions to this day. This century of humiliation is a core reason why China is so assertive about its growth and expansion today. It believes it should just get back its rightful place in the world, which was stolen by Western powers by force and subjugated through drug addiction. The Chinese CCP takes its legitimacy from ending this dark period of Chinese history. This is why it’s so sensitive to US power, why it builds up its military now, why education is so patriotic, why it wants to close that chapter by unifying with Taiwan.12
What can we expect from China based on this? To continue this buildup, to become stronger and more nationalistic, to never ask for other great powers’ help, to continue getting land buffers around it, and to try hard to unify with Taiwan.
As for trade, today, we’re back to a world where China is a net exporter.
Once again, China produces more than it consumes, which means it’s more interested in foreign money than goods. Once again, Western governments freak out about this deficit, which can’t continue forever.
If we follow history, what can we expect to happen in the future? Like for silk, porcelain, and tea, Western countries will likely try to figure out Chinese manufacturing prowess and replicate it in the West—exactly what China has been doing to Western countries for the past 45 years.
China is protecting its economy from foreign trade like it has done for thousands of years. So if the Opium Wars are a valid precedent, Western countries will do whatever they can to open up trade to China. This is the context for the trade war that Trump has started, except this time Chinese markets can’t be opened up with guns. Or can they? Will this eventually lead to war?
I think there’s one fundamental difference between today and previous instances: currency. For 2,000 years, China was obsessed about hoarding one thing: silver. Why? Why was silver so important? Why did China need it so much? Why couldn’t it produce it? Why isn’t it as important today as it was in the past? Has US debt replaced silver? These are the questions I’m going to answer in this week’s premium article.
ChatGPT tells me a sestertius is worth $2-$30 today if you compare food and wages, so 100M sesterces would be about $200M-$3B today. It also estimates the Roman Empire’s budget at 800M sesterces, so the spend on luxury goods would be equivalent to ~12% of the annual budget of the government!
In most history texts you read, these lists of goods are named in passing, but in reality this is where most of the interesting stuff lies. For example, where did that amber come from? Most of it was from the Baltic shores, near what is today Gdansk, Poland. This in turn was one of the sources of income and development for that region, starting with the Romans. Amber is a product of that region to this day.
There are several reports of that time that mention the Chinese’s refusal to meet or interact during trades. I find that fascinating.
Some porcelain arrived earlier than that, in the 1300s or so, via Constantinople, but the volume was extremely low at that time.
Mainly Potosí in Bolivia and Zacatecas in Mexico
Fun fact: part of this success that was unique to Britain was the hand of the government. From Wikipedia: “The British East India Company, at the time, had a greater interest in the tea trade than in the coffee trade, as competition for coffee had heightened internationally with the expansion of coffeehouses throughout the rest of Europe. Government policy fostered trade with India and China, and the government offered encouragements to anything that would stimulate demand for tea. Tea had become fashionable at court, and tea houses, which drew their clientele from both sexes, began to grow in popularity. The growing popularity of tea is explained by the ease with which it is prepared. ‘To brew tea, all that is needed is to add boiling water; coffee, in contrast, required roasting, grinding and brewing.’"
The letter is so arrogant, it’s really entertaining. It goes on, addressing why the British can’t take land for trade purposes, can’t trade with more ports, and can’t spread Christianism. I’m especially a fan of this sentence: “It may be, O King, that the above proposals have been wantonly made by your Ambassador on his own responsibility, or peradventure you yourself are ignorant of our dynastic regulations and had no intention of transgressing them when you expressed these wild ideas and hopes....”
And what are today India, Sri Lanka, Bangladesh, Pakistan, and parts of Afghanistan.
Opium was already known and used in China, just not widespread. The British spread its smoking, which made it more successful.
Originally just Britain and France, who fought the Chinese in the 2nd Opium War. The US and Russia would also get access to trade in China, and later other countries like the Netherlands, Portugal, Italy, Japan…
In terms of GDP per capita for sure. With 500M people in 1950, that was hardly a backwater in terms of overall GDP or power.
Or why Singapore is so aggressive against drugs today: It was founded by a Chinese majority, and the memory of the opium tragedy is still fresh.
2025-07-06 17:00:18
A few weeks ago, I shared the four layers of fashion, the reasons why we dress the way we dress: function, aesthetics, signaling, and path dependency. But it’s hard to be convinced of how universal these rules are without considering examples, so here are four key ones: suits, athleisure, jeans, and saris.
Usually a dark blue or …
2025-07-03 20:01:53
Last week, we covered in this premium article whether Iran’s nuclear facilities are destroyed, whether it is going to pursue a nuclear bomb, and what Israel and the US will do as a result.
This article is the last one in this series. Here are all the articles on Iran and the war against Israel:
Iran: Its geopolitics, and why it’s impossible to invade on the ground.
Why Did Israel Strike Iran Now?: Why Iran’s current government hates Israel so much, why it developed a nuclear program, and why now was a uniquely good time for Israel to attack Iran.
Where Will the Israel – Iran War Go from Here?: Israel’s goals in this war, how they’ve fared so far, and what’s left for them to do.
Will Iran Pursue the Nuclear Bomb? Yes, and how that pushes Israel to want to topple the Iranian government.
Which leads us to this:
Israel’s situation room, July 3rd 2025
PRIME MINISTER NETANYAHU: Gentlemen, we’ve lived under the yoke of Iran’s threats since the 1979 Islamist Revolution. For decades, we’ve feared their buildup of proxies around us, their ballistic missiles, and more importantly, their nuclear program.
But we saw a unique window of opportunity and we took it. Today, their proxies are neutralized, their ballistic missiles program in shambles, their nuclear program in tatters. This is a dream come true. We are safe today.
EYAL ZAMIR, CHIEF OF THE GENERAL STAFF OF THE ISRAEL DEFENSE FORCES (IDF): Today, but not tomorrow. Iranian government leaders will see their weakness and conclude that their only hope to hold onto power is a nuclear weapon.
So should we wait for them to succeed?
Should we strike again in a few years, knowing that every time they will learn more and defend themselves better?
Should we just continue assassinating their nuclear physicists and destroying their nuclear facilities?
…
Or should we take advantage of their weakness today, go straight to the root, and topple the government?
NETANYAHU: Can we even do that? We should weigh the pros and cons of trying. David?
DAVID BARNEA, DIRECTOR OF THE MOSSAD: We should break the question down into four pieces:
We can’t topple a popular government. Do Iranians want the current government to stay or leave?
Iran is a country with very strong secret services and tools to oppress its population. Can we weaken that machinery?
You can’t just hit the current government and hope somebody else will emerge to take over power. Are there alternative sources of power that can challenge the current government?
If so, how can they actually take power?
Iranians have been protesting against the government ever more frequently in the last couple of decades:
I still remember the Green Movement in 2009:
As recently as May 2025, there were strikes and demonstrations from truck drivers, nurses, farmers, and retirees across dozens of cities.
During Israel’s bombing of Iran, people manifested their discontent with the regime:
But demonstrations might not be representative. What do people really think? It’s a tricky question, because who do you ask?
Iranians inside the country can’t speak freely.
Iranians abroad are self-selected to escape the regime. They will be against it by default.
That said, this is the data we have:
Here’s another survey, from Gallup:
A less biased1 source suggests the number of people who would oppose the Islamic Republic in 2019 was 70%. A leaked study by the regime’s Ministry of Culture and Islamic Guidance found that 73% of Iranians wanted a separation of Church and State.
Additionally, 74% of Iranians think their economy is bad:
This is partly due to sanctions, but Iranians know it’s not only that.
I’m going to assume that 50-80% of Iranians want a regime change. But they don’t want just any regime change:2
As an Iranian, I can tell you the situation is no longer just political—it's existential. We are trapped between two collapsing structures: one internal, one external. On one hand, we face a deeply dysfunctional government, led by the Supreme Leader and the Islamic Republic’s unelected institutions.
Decades of economic mismanagement, suppression of dissent, and brutal ideological control have alienated multiple generations. No one believes in reform anymore—because every attempt has either been co-opted or crushed.
But here's the paradox: We are also terrified of regime collapse—because we've watched the aftermath of Western intervention in countries like Iraq, Libya, Syria, and Afghanistan.
Each was promised freedom; each descended into chaos, civil war, or foreign occupation. So no, we don't trust the U.S. or Israel. Not because we support our regime—but because we know how imperial powers treat ‘liberated’ nations in the Middle East.
Freedom, in their language, often means vacuum, fire, and permanent instability. Right now, many Iranians live with three truths at once: The Islamic Republic is morally and politically bankrupt. The alternatives offered by foreign actors are not liberation—they’re collapse. A bad government is survivable. No government is not.
We are not silent because we agree. We are cautious because we’ve learned—too well—what happens when superpowers decide to "help." In a sentence: Iran is a nation held hostage by its own regime, but haunted by the fate of its neighbors. We are stuck in a house we hate, surrounded by fires we fear more.
And if 50-80% of Iranians want the regime to change, it means 20-50% don’t. Who are these people?
Iran ranks 151 out of 180 in corruption:
But wait, if there’s corruption, it means somebody benefits from it, right? In Iran, if you are upper class or upper-middle class, you are part of the government, whether directly or indirectly. The military, public jobs, businesses with government contacts… All are supported by the government, This means there are tens of millions of people with a vested interest in the regime staying in power.
So:
A powerful minority of Iranians want the current regime to stay, because they benefit from it.
While the vast majority wants the regime to be toppled.
However, they’re scared of what would happen if the current regime falls.
More importantly, they fear the regime’s oppression:
It’s hard to coordinate an uprising when an oppressive machinery is liable to kill you every time you step outside.
Iran is rated 160th out of 165 countries in freedom. Since 2022, more than 4,000 street protests have taken place across every province in Iran, more than 21,000 protestors have been arrested, and more than 550 people killed.
People feared this would become ten times worse after Israel’s bombings.
They were right.
"All of Tehran has turned into a military barracks. Suppressive forces [Basijis] are patrolling through the streets, harassing everyone just like in previous uprisings and massacres [2022, 2019]. You can’t walk through streets without facing trouble. If even one of Khamenei's dogs suspects you and checks your phone, they’ll handcuff you on the spot and take you away. They accuse you of collaborating with Israel. Why? Because you're happy that the murderers of Mahsa, Nika and Hamidreza [well known victims of the IR] are finally dead. I spit on the grave of all the so-called 'fellow Iranians' abroad who are trying to keep these bastards in power.
Right now in Iran, there is a full-scale security crackdown. Armed checkpoints are everywhere. IRGC, Basij, and plainclothes forces are stopping cars, searching phones, and intimidating people.
On top of that, the regime is taking families of Iranian journalists and activists abroad hostage, threatening them to silence opposition voices.
Dozens were arrested today. Several were executed this week under false charges of "spying for Israel", the regime uses fear and lies to justify killings.—Source
Five million fleeing Tehran, IRGC patrols executing anyone they accuse of being Mossad without trial, internet blackouts choking 97 percent of the country, bombs falling, thousands of activists dragged into cells, no coordination, no signal, no air to breathe.
Organizing in that dark isn’t courage, it’s suicide.—Source
This is how we should interpret Israel’s intense bombing of Iranian defense forces, focused on the Islamic Revolutionary Guard Corps and the Basij militia:
You can witness the specific targeting of IRGC here:
Israel has also bombed many Basij and IRGC facilities:3
The Basij headquarters in Tehran and Isfahan
IRGC provincial units in the Alborz Province and in Tehran
The Evin prison for political prisoners
The IRGC Amand Missile Base near Tabriz
The Imam Hossein missile base in Yazd
The Shahid Mostafa Khomeini base in Qom (which housed ballistic missiles and drones)
The IRGC’s Islamic Republic of Iran Broadcasting (IRIB)
The Ministry of Intelligence and Security (MOIS)
The Law Enforcement Command (LEC) headquarters
And many more. And Israel won’t stop here:
But this is not enough.
We saw in this article that Iran is a strong regional power, but it depends on international superpowers. For the last century, it’s been in turn dependent on the British, the US, and Russia. Since it’s so central in the world, it’s very hard for an Iranian regime to stay in power if many of its neighbors want it toppled.
Obviously, the US is not thrilled with an Iran that used to be an ally and now wants its elimination.
Iran is also against Saudi Arabia, because Saudi Arabia is:
A monarchy
Aligned with the West
Emerging as a local power that challenges Iran’s goals of regional domination
Is Sunni (as opposed to Iran, majority Shia)
It’s why Iran has supported Houthis in Yemen against the interests of Saudi Arabia, or why Iran sent drones to attack Saudi refineries in 2019. As a result, Saudi Arabia is no fan of Iran either, and would like to see it toppled.
Jordan and the UAE are other Sunni monarchies, and see themselves similarly at odds with Iran.
Egypt is a republic like Iran, but it’s a secular one. In fact, the Muslim Brotherhood is banned there—not what theocratic Iran loves. So Egypt is no fan of Iran either.
Up till now, the biggest benefactor was Russia, but Russia never wanted a competitor, only a subordinate ally, so it never aggressively pushed for Iran’s development. And now that it’s entangled in Ukraine, it can do little to support Iran.
So Iran is uniquely alone today. Its oppressive regime is being pummeled by Israel, and is not supported from outside.
But as you can imagine, you can weaken the leadership of the Basij and IRGC and starve it of support, but you can’t bomb your way to eliminating hundreds of thousands of members. You need others to be strong enough to rise and topple the regime.
In 1979, when Shah Pahlavi escaped Iran, Khomeini was already famous as a strong voice against the pro-Western government, which made him a logical successor to power. But the current government is much more careful about allowing alternative sources of power. Who, then, could emerge to successfully fight and replace the Ayatollah, the IRGC, and the Basij?
An obvious candidate is Reza, the son of the previous Shah Pahlavi:
He was active on social media to push for an uprising, and he was hoping to help transition from the current regime.4
At some point he had some support:
Even from the military:
But of course, not everybody wants a monarchy, especially led by someone who spent his life in the US. It’s unlikely he will take power in the coming weeks.
There’s also the People’s Mojahedin Organization, but they’re Islamist Communists, so that’s that.
Another alternative could be Mir Hossein Mousavi, who likely won the popular vote against Ahmadinejad in 2009, but the government rigged the election. He’s been under house arrest ever since.
There are also some activist groups—especially students, the same that brought Khomeini to power—but these don’t seem to be nationally present or strong.
Then there’s this:
Syria fell into a civil war through ethnic conflict.
Lebanon fell into a civil war through ethnic conflict.
Iraq has suffered from ethnic strife since the 2003 invasion by the US.
One of the keys to these uprisings is that ethnicities span across borders, and this is true in Iran, too.
The Kurds have already found some autonomy via military force in Syria and Iraq. It would not be a stretch to expand it in Iran.
Azeris also have their share of military experience. Azerbaijan recently won against Armenia in its conflict over Nagorno-Karabakh. Notably, Azeris were supported by Turkey—a local power that vies for regional supremacy against Iran—while Iran supported the losing Armenia.
The Baloch are in a remote, desertic, mountainous area that straddles Afghanistan and Pakistan, although they’re not politically organized as strongly as the other groups.
If we look at what happened in other countries in the region, when ethnic conflict challenges the central power, there’s civil war.
Iran knows this and suppresses these regions more violently than the Persian heartland.
And here we face a coordination issue. Kurds, Arabs, Baloch… all are small minorities that can’t challenge the Persian heartland. Only the Azeris are big enough to do it, and they could be supported by Azerbaijan, but there are only 10 million Azeris in Azerbaijan, so their support from outside could not single-handedly topple the Iranian government, or even allow Azeris to proclaim independence. If all minorities rise in arms at the same time, they could split the focus of the military and have a chance at remaining independent after a civil war, but how could they coordinate? Very hard with an Iranian regime so aggressively present in the regions.
Iranians demonstrated in 1979 and toppled the government.
But they’ve been demonstrating for decades since then, with no success. Why?
This leads us to a core misconception in politics today: Demonstrations don’t usually work.
People take to the streets, make noise, nothing happens, and then they go home. Some examples outside of Iran are the Occupy Wall Street or the Women’s Protests against Trump in 2016.
Why? Because people in power don’t want to lose it. They won’t simply vacate it when there’s opposition. The only way they will change is if their power is threatened.
In democracies, power can be threatened if the demonstrations are huge and if they raise awareness on a previously unknown injustice. This can swing people’s vote, and throw the current parties out of power. But if the protest does not reveal new information, everybody already knows about a problem and protesting against it won’t change opinions much, so it won’t change who’s in power.
And this is in democracies! In autocracies like in Iran, the government doesn’t care about people’s opinions: Their vote doesn’t count anyway! So what moves the people in power? A threat to their lives. If they think they can be killed, they will run away.
But of course, the government controls the security forces. Who owns the gun owns the power. In democracies, the military follows the constitutions of the country so they don’t influence political outcomes. In autocracies, the autocrats control the guns—and that’s especially true in Iran.5 So how can opposition win? Only if, somehow, they can get ahold of the guns.
This is how we should interpret Israel’s constant attacks on the leadership of the government, the IRGC, and the Basij militias. Note who is not present there: the leadership of the rest of the military. That’s because after 46 years of radicalization of the IRGC and Basij, it’s unlikely they will turn on the government. But the military is not as radicalized, is farther from the government, and has more to win by toppling it.
We’re now ready to understand everything Israel and Iran are going to do in the coming months.
Iranians want the end of the regime.
But they’re concerned about chaos and what might emerge from regime change.
The regime doesn’t want to be toppled, so it’s doubling down on its brutal suppression of dissent.
Supported by a strong and powerful minority that benefits from the regime
The oppression has prevented alternative sources of power from emerging in the past, and there are few valid ones today.
Regardless, autocracies usually only fall when they’re threatened by guns.
Ethnic minorities could access these weapons. If they revolted, they could drag Iran into a civil war. But they don’t necessarily want that unless the Persian government is weakened, and they can’t easily coordinate between themselves to rise at the same time.
The grip on power of the current government is based on the guns of the IRGC and Basij militias, who are not about to topple it as they’re the most vested in its success.
But the broader military is not as close to the government, so it might be the most interested in rising up.
And this might be especially true now that Iran has few superpowers supporting them.
All of this is why prediction markets don’t think the Iranian regime will fall in 2025:
So the government is unlikely to fall, but Israel will nevertheless try to make it happen.
MOSSAD DIRECTOR: This won’t be easy. To topple the Iranian regime, we need to decapitate the government, the IRGC, and Basij. The weaker these guns, the more likely alternatives can emerge.
Then, we need to talk with all sorts of alternative political leaders inside and outside of Iran, to see if they could form a coalition against the government.
At the same time, we need to talk with anybody who might help ethnic minorities rise: Azerbaijan and Azeri leaders in Iran; Kurdish leaders across Iran, Iraq, Syria, and Turkey; Arab leaders in Khuzestan; Baloch leaders; Turkey or Saudi Arabia if they want to support any of these ethnicities; the US if they want to help…
HEAD OF THE IDF: Not just ethnic support. We also need to make sure that no external government props up Iran. We need to break any support from Russia, and we need to definitely prevent the Chinese from jumping in.
MOSSAD DIRECTOR: Yes, that’s true. Then, with all these collaborators, we must provide them with either weapons, money, coordination, or all of the above.
Finally, we must get in touch with all the military leaders we can outside of the IRGC and the Basij, and try to give them support (money and coordination?) to rise up against the government whenever the right moment arrives.
NETANYAHU: So, destroy the current government, prop up new centers of power, push them against each other, and prevent Russia and China from intervening. That is a long shot…
This article ends the Iran series. In the premium article this week, we’re going back to the deep patterns of fashion, to understand why we dress the way we dress through examples like jeans, athleisure, suits, and saris. Subscribe to read it!
From Brookings: This remarkable hypothetical was not declared by an exiled Iranian dissident, but by the well-known Tehran political science professor, Sadegh Zibakalam, in an interview during the upheaval that took place in late 2017 and early 2018.
This is the source of the anonymous comment. I tried to find this comment on this guy’s Youtube Channel but couldn’t, so my confidence in his claim that this is an actual quote from a guy on his YouTube is low. That said, I’m not sure this is relevant because the comment makes sense by itself.
I asked this to Grok and ChatGPT, and looked at the sources. I didn’t check every one of these, so don’t take this list as final. Rather, I thought it illustrates well a fact that I haven’t seen disputed anywhere yet: That Israel is targeting with special intensity the IRGC and the Basij militias.
And maybe attain power…?
Note that when the Shah Pahlavi lost, a key element was that he lost the control of the military, because he didn’t want to let them loose on civilians.
2025-06-26 20:02:27
This is the premium article of the week
Imagine you’re the Iranian Ayatollah and his Revolutionary Guards (IRGC). Your defenses have just been reduced to ashes. The decades you spent building drones, ballistic missiles, an air force, an air defense system? All gone.
You’ve spent the last 45 years hating on Israel and declaring their demise. And everything…
2025-06-22 18:15:05
You need two sides to fight a war. Iran probably didn’t want it: It didn’t start it, and it’s been suffering the most. It probably wants vengeance now, but this is the number of missiles Iran has launched in each successive wave:
Iran’s power is plummeting. Its defense capabilities are seriously damaged. Its leaders are being decimated. Its nuclear facilities have just been bombed to ashes. If it can save face, it would probably sign a ceasefire.
If this is true, maybe Iran has a joker up its sleeve, but it had ample reasons to deploy it by now. The fact that it hasn’t suggests the biggest factor in deciding how the war will end between Israel and Iran is: When will Israel stop bombing Iran?
Unclear that will happen soon. Israel is operating nearly at will in the country. Its number of airstrikes barely budged over the first few days:
When will Israel stop? To answer that question, we need to understand Israel’s goals for the war. As we saw in the previous article:
Iran defines itself in opposition to the US and Israel, and has promised the elimination of Israel for 46 years, since the 1979 revolution.
Iran had a nuclear weapons program in the past, and has recently been weeks to months away from developing a nuclear weapon.
Additionally, Iran had thousands of ballistic missiles and was accelerating its production.
Israel’s Prime Minister Netanyahu has said explicitly these are his goals for the war:
Here’s more detail on why:
From this, we can conclude that Israel’s goals are:
Eliminate Iran’s ballistic missiles capabilities and hinder Iran’s progress towards a nuclear bomb as much as possible
Make sure Iran can never get back on track to building either a ballistic missile program or a nuclear one.
Let’s look at each in turn.
Israel has been bombing Iran heavily.
This is what it looks like:
First, it focused on bringing down Iran’s defenses, but that’s simply for freedom to operate, in order to reach its true goal: take out Iran’s ballistics program and, more importantly, its nuclear program, as advertised by the Iranian regime.
According to Grok, this video was originally posted on June 17th 2025 by the Islamic Republic News Agency (IRNA) in Arabic on X. IRNA is Iran’s official state-run news agency, and was established in 1934. IRNA serves as a primary media outlet for the Iranian government, disseminating news domestically and internationally. Grok could be wrong, though.
With this incentive, Israel has been happily bombing every ballistic missile and nuclear facility it could find in Iran.
Israel had destroyed the Arak nuclear reactor. It had attacked Natanz and destroyed the facilities above ground. Some of its uranium centrifuges had likely broken, but the underground facility had not been destroyed. According to the director-general of the IAEA, all 14,000 centrifuges at the site were likely “severely damaged if not destroyed altogether”.1 But it was probably not enough for Israel to completely stop the Iranian program.
Israel also bombed the Fordow plant, but it hadn’t destroyed it—or maybe even incapacitated it—because it’s under a mountain.
It’s a serious facility, buried 80-90 meters deep.
Or rather, it was. Tonight, the US bombed the hell out of it with this bomb:
The GBU-57 Massive Ordnance Penetrator (MOP) weighs 13 tons, which allows it to reach 60 m below ground before exploding.
This might not be enough to reach the facilities, which is why the US dropped 14 of those on Fordow.
It also bombed the facilities in Natanz and Isfahan.
The US said this is a one-off and it won’t intervene anymore. So is this is? Will Israel pack its stuff and go? I don’t think so.
Another, more recent facility south of Natanz, known as Mt Kolang Gaz La (perhaps even more deeply buried) hasn’t been bombed as far as I know.
Unfortunately, we don’t know where Iran’s 400 kg of enriched uranium is. The IAEA (International Atomic Energy Agency, the UN watchdog) said they couldn’t identify any radiation in the sites, which is actually bad news, because this radiation would not likely be bad for health, but it probably suggests that the US didn’t hit that material; it must be safe somewhere else.
Bombing the hell out of the nuclear facilities is not enough if you can rebuild them. So in addition, Israel has been shooting and bombing nuclear scientists throughout the country, to eliminate as much nuclear knowledge as possible. It claims to have killed at least 14 of them, as well as many of the senior officials who oversaw their work, and the headquarters of the organisation that led Iran’s post-2003 nuclear-related work. It’s doing the same with all sorts of Iranian leadership:
Could Israel stop here? No it can’t.
Say they think “OK enough, let’s pause here.” Iran could easily say “Okay, we don’t care about Fordow. We’ve abandoned it. Now we’re going to take the 2,000 or 3,000 centrifuges that we had built and have moved before your attack and put them someplace you don’t know about and then enrich to 60%. We will also use the uranium we have and that you didn’t bomb.”
Indeed, prediction markets think there’s only a 15% chance that Iran agrees to end uranium enrichment by August. They still believe there’s a 40% chance Iran develops a nuclear bomb by 2030, and a 69% chance by 2041.
Israel can’t just walk away and leave Iran with a pathway to weapon-grade uranium production. That defeats the entire purpose of the operation—especially since now Iran realizes that its conventional defense forces are not enough, and the only way they can defend themselves against Israel in the long term is if they have a nuclear weapon.
So Israel will continue bombing Iran for the foreseeable future, until all other nuclear facilities are identified and destroyed, most Iranian nuclear physicists killed, and enriched uranium is taken care of.2 That’s why prediction markets believe there’s only a 15% chance that Israel stops its operation before July.
Even that would not be enough though, and it’s linked to another scenario: Could Iran surrender and accept a peace treaty where they give up nuclear weapons forever?
In the previous article, I focused a lot on proving that the elimination of Israel is a core part of how the Iranian government defines itself. It’s a fundamental part of its belief system. It can’t turn away from that now, or all its legitimacy would vanish. So Israel can’t really stop at destroying nuclear facilities.
This might be why prediction markets believe this:
Although markets don’t agree that the end of the Islamic Republic is near:
It’s not just because of the Ayatollah, though:
Not everybody shares these beliefs in Iran, but anti-Zionism is strong enough in the government that Israel might feel it must topple the government to be safe.
The prime minister seems increasingly fixated on toppling Iran’s regime. In a statement addressed to the people of Iran on June 13th he urged them to “stand up” against their rulers. Two days later, in an interview with Fox News, he was asked if regime change was Israel’s goal. “It could certainly be the result, because the Iran regime is very weak,” Mr Netanyahu replied.—The Economist.
The military is acting accordingly:
And if that doesn’t work either, another option is to help the country splinter. If Kurds, Azeris, Balochis, or Arabs decide to break away, like Soviet Republics as the USSR fell, the resulting Iran would be much weaker, much poorer, and in a much more difficult position to build a nuclear bomb.
Israel has spent years planning this war. It has now destroyed a big chunk of Iran’s ballistic and nuclear program, but not completely. So it will continue bombing Iran until these are reduced to dust.
There’s a chance that Israel stops there, but it’s not sure this is what’s going to happen: If the current Iranian government stays in power, it will likely double down on a nuclear program, this time much more secretively. Israel knows this, so it will do everything it can to topple the government or splinter Iran. Since now Israel has the military upper hand, it will continue using this asset until it has assurances that Iran will never be a threat again. This means many more days or weeks of bombings, and potentially operations on the ground.
The question becomes then: How likely is Israel going to succeed at toppling the Iranian government? That’s what we’re going to see in the next premium article.
Apparently, when electric current is cut to the centrifuges, they slowly decelerate. At some points in the process, their rotation speed hits resonance frequencies, which makes them wobble uncontrollably and break. When Iranian operators slowly turned them down in the past, they lacked experience and ⅓ of the centrifuges broke. Imagine what would happen if the centrifuges slow down without any control at all.
The hardest part of uranium enriching is actually going from ore to 5%. Going from 60% to weapon-grade, which is ~90%+, is much easier.
