🌏 Midyear Geopolitical scan: The shifting definition of power
The most consequential geopolitical shifts rarely begin with dramatic announcements
For those of you who may not know, the S3T Strategic Awareness Engine (SAE) is a platform that monitors early signals and indicators from hundreds of sources and then organizes them into 5 Layers:
Layer 1: Physical
Layer 2: Economic
Layer 3: Capital
Layer 4: Political
Layer 5: Societal
In the S3T Strategic Awareness model we tend to focus on the top layer that represents the operational realities and limited resources of the physical world.
Early signals telling us what will happen in the Economic, Capital, Political and Society layers almost always start in the Physical layer. These signals may be ignored or misread in the layers below - Capital, Economics, Politics and Society - at least until the inevitable consequences start to become obvious. This recurring cycle of unaware-->vaguely aware -->fully aware is what drives the bull and bear markets, corrections and bubbles. It can also take the form of ignorance-->refusal to acknowledge-->acceptance.
I saw this in the months playing up to the housing crisis in 2007-2008. Data and indicators clearly spelled out what was going to happen and pretty accurately when it was going to happen and how long it would last. But I found that people who were exposed to this data and/or the concerns of a bubble market often just refused to see it. There was too much greed driven momentum, and seeing the obvious sometimes requires a level of independent thinking that most apparently don't possess. That was a powerful lesson for me: sometimes we really can see what’s coming - we just don’t want to.
So if we want to have a strategic advantage, we pay close attention to the signals coming from the Physical layer of the Strategic Awareness model. These signals include all the physics, math and scarcities of the physical world: air supply, water supply, gravity, distance, shipping routes, transportation speed, sources of energy, climate and weather drivers - to name just a few.
We tend to devote a lot of time to the interaction between Layer 1 (Physical) and Layers 2 and 3 (Capital and Economics) because scarcity impacts price and economic activity.
But this week - with the maritime escalations in the Middle East and the reviewed shipping/tariff friction - is a great time to look at the interaction between the Physical layer and the Political layer - specifically how do governments read and respond to the realities in the Physical layer?
You could say Geopolitics is basically the study of how governments respond to scarcity.
A chief questions in geopolitics at a given point in time:
- Which nations will have the best built in advantages vs. which ones will have to work harder to maintain any sort of parity
- Which nations are behaving in ways that undermine their own advantages? Which ones are growing their advantages?
It boils down to which Governments are doing the better job of reading the signals in the Physical layer?
This week we released the S3T 2026 Midyear Geopolitical Scan for paying members.
Once or twice a year its important to take time to examine the "large techtonic plates" of geopolitics because while they may be moving in less than obvious ways, they are definitely reshaping the world we will live in. This was a lot of fun to develop and examines three connected questions:
- What gives nations real strategic power here in the the 21st century?
- How is China building influence across the entire technology stack?
- Where might today’s most serious constraints become tomorrow’s greatest opportunities?
Together, the three parts offer a broader way to understand the strategic landscape.
The most consequential geopolitical shifts don't always begin with dramatic announcements
One shift underway for a while now relates to the world's working definition of what global power actually is. In the past we have defined it in terms of military might and deterrence: The ability to give everyone the impression that they don't want to go to war with you. Here in the 21st century the domination model runs afoul of new realities:
- Smaller nations and non-state actors armed with modern technology can create fear and chaos that forces larger nations to spend beyond their means.
- Smaller more focused powers can create the rapid kind of innovation that Ukraine executed in its highly effective drone industry - and stall the momentum of larger more heavily armed opponents.
In place of the domination model, a new definition of power seems to be forming, based on the calculus that the most useful form of power is not being dominant but rather being indispensable.
It is fascinating to notice which countries seem to get this, and which ones do not.
To be clear this is not saying that some countries are perfect or doing everything right. All countries make mistakes - even big ones- but it’s useful to notice which direction their trial and error is headed. Different countries have different margins for error or “mistake budgets” - how many errors you can make without seriously damaging your advantages and position.
Some are patiently building future advantages for themselves by shifting to more abundant forms of energy and continuously building infrastructure and alliances. Some are squandering their “mistake budget” on less intelligent aims.
Thank you for reading and for continuing to explore these questions together. Hope you have a restorative and enjoyable weekend and a great week ahead!
Opinions expressed are those of the individuals and do not reflect the official positions of companies or organizations those individuals may be affiliated with. Not financial, investment or legal advice, and no offers for securities or investment opportunities are intended. Mentions should not be construed as endorsements. Authors or guests may hold assets discussed or may have interests in companies mentioned.
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