The Myth of Resilience

We used to believe the world would only bend, never break. That myth died with COVID.

ONE boat gets stuck in a canal and suddenly I’m scrambling to stock up on IKEA Swedish meatballs.

This is all it took to break me. I’m weak. But apparently, so is a vast part of the global supply chain.

Add in the factory shutdowns during COVID and it was a perfect storm. Suddenly the world’s most powerful economy was forcing you to buy the most god-forsaken toilet paper that felt like sandpaper. Even today, things are still out of whack. Houthi _who? rebels in Yemen have been lobbing rockets at cargo ships in the Red Sea, causing a huge rerouting of global trade and jacking up insurance costs.

But this is just the tip of the shipping container _tehe.

Most recently, Trump has yet again delayed most of his tariffs, which will probably lead to a “get it while it’s cheap” surge in demand, as reported by the CEO of supply chain logistics platform, Flexport.

And this is AFTER last week, when a federal court blocked most of Trump’s tariffs.

We’re in deep. And there’s no going back from our interconnected world. So buckle up, because I’ve got some surprising shortages in store for you _{(see what I did there, pls say yes)}.

I Love The Smell of Ammo Shortages in The Morning

All the liberals love to meme about how no militia of dudes in Bass Pro camo could ever take on the U.S. military.

Unlike many other countries, we love to gawk at our military might.

But here’s the rub: we’d apparently run out of missiles in eight days if a real war broke out with China.

Ergo, we do not have the military manufacturing capacity that we once did, even as recently as the 1990s. And most certainly not the military that won us World War II. No, this isn’t because of the whole “good times make weak men” B.S. that losers in their mom’s basement love to proclaim.

It’s simple: factories make stuff. The less factories we have, the less stuff we can make, including weapons. And guess what? We don’t have as many factories as we used to! I’ll yap all day about the benefits of international free trade, but sending away the backbone of our national defense was a mistake.

Instead, our military supply chain is like mediocre Costco: bulk ordering weapons from a few legacy manufacturers with lead times that feel like ordering a sofa from Restoration Hardware. One factory in Scranton, PA, produces up to 40% of certain artillery shells. What do we do if this factory goes down? I know Michael Scott would be pissed.

This is a hard pill for someone like me to swallow. I was someone who believed in these kinds of jokes about the U.S. military easily annihilating any potential internal (or even external) threat:

But as you’ve just read, military supplies is not infinite.

The Savoriest of Chips

Modern life runs on silicon, and ~60% of the global supply of semiconductors (smart silicon) and nearly 90% of the really smart semiconductors are manufactured on one island.

This island just so happens to be within swimming distance of a military superpower that is, by all indicators (unless you’re illiterate, deaf, AND blind), hell-bent on taking it.

Ladies and gentlemen: the island of Taiwan.

Don’t ask me how we ended up here, but currently, the lifeblood of modern devices (cars, computers, phones, cameras, military equipment, etc.) all depends nearly entirely on one company called TSMC. And where are they located? In Taiwan 🥲

I may be a jack of all trades and master of none, but you and I can agree, this isn’t good.

If China ever makes a move on Taiwan, it may end up leading to a global technology blackout. Your phone, your car, your fridge (!!!!), your army? Cooked.

On the bright side, contrary to popular narratives:

1. Putting restrictions on companies exporting chips to China has been working.

2. A big piece of legislation that the Biden administration passed, called the CHIPS and Science Act, has actually been boosting domestic semiconductor manufacturing and research. Luckily this has led to the construction of chip factories in the U.S.! Not just money allocated, but actual things built!

However, some, like famous tech blogger Ben Thompson, argue we should make sure both China and the U.S. increase their dependence on Taiwan’s semiconductor manufacturing so China is less incentivized to invade. To me, though, the best way to avoid this disaster is to deter China by proving that it will be too costly to invade Taiwan.

But to do this, we have to build up our national defense manufacturing at home.

The Worst Kind of Drought

Arguably the hardest time we all faced together: the sriracha shortage. 

A mix of climate issues in Mexico and supplier drama led to barren shelves and dry noodles. It turns out even our condiment cravings are at the mercy of weather and supply chains. Damn.

But potentially bigger threats are on the horizon..

The Fungus Among Us

Meet Norman Borlaug, an Iowa scientist who is believed to have saved nearly a billion lives.

He managed to develop "miracle wheat" varieties that were resistant to the infamous stem rust fungus and adapted to different growing conditions around the world (which no one thought possible at the time!). Thus, Norman kicked off the Green Revolution, skyrocketing food production across the world in countries like Mexico, India, and Pakistan.

This guy spent nearly 15 years in 100 degree heat in Mexico, using tweezers (!!!), to achieve this. This man was dialled.

But it looks like certain, resistant little fungi may be on the rise in parts of Africa.

And as we learned with COVID, trying to block diseases (or fungi) from crossing borders or protect our supply chains doesn’t work.

The myth wasn’t that systems would never fail. The myth was that they’d rebound instantly.

But from ammo to semiconductors to sriracha, the truth is clear: we’ve traded slack for efficiency, resilience for speed.

Still, I’m not screaming doomsday. We can keep up our progress. We can invest in local manufacturing, diversify suppliers, and even develop fungus-fighting wheat.

Globalization gave us iPhones, better jobs, cheap electronics, and exotic fruits during winter. But it also gave us a world held together by single points of failure.

We’re not living in a flimsy Jenga tower, but it’s also not a impenetrable fortress.

It’s more like a giant, glittering skyscraper: impressive, powerful, but vulnerable if we ignore the load-bearing beams.

Thanks for taking the Pack,

Zach

_{The vibe-killer disclaimer: The opinions in this post and all other posts only represent myself and do not represent the opinions of my employer or any groups I am a member of.
This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.}