How a generation of underinvestment, the death of SaaS moats, and the physics of scarcity are creating the greatest reallocation from bits to atoms in modern market history
Good piece, and water is the right second derivative to pull on. Where I’d push back: the market has recognized water. What it still can’t/doesn’t do is book it. The rights that clear at auction re-rate. The water two steps upstream of the data center doesn’t, because it isn’t legible yet. That gap is the trade.
This is exactly the market structure shift I’m watching.
The last cycle rewarded asset-light businesses because software could scale faster than physical constraints. The next cycle may reward the opposite: control over power, compute, commodities, infrastructure, logistics, and real-world capacity.
When scarcity moves from code to atoms, capital allocation changes. Margins, moats, and valuation multiples have to be rebuilt around physical bottlenecks, not just digital distribution.
That is the framework I care about: how macro scarcity transmits into sectors, balance sheets, and portfolio construction.
Thank you for your article, it raised some interesting points. I agree with your thoughts around the value of owning hard assets in sectors which have suffered from long periods of under investment. Particularly in sectors which need constant capital investment just to keep the supply stable like metals and energy producers. That reality coupled with rising demand, and long time horizons for new supply to come online after the moment a final investment decision has been made (years for copper, for instance). That means owning companies which have those hard assets today and will earn more if prices go up due to shortages can become one of the best trends in the years to come. I am certainly positioned like that. However, I disagree with your opinion that all capital light companies will do worse than they used to do. I believe there are some that will continue to do extremely well for the foreseeable future.
I am curious to read some more concrete ideas of yours after this big picture piece.
Good piece, and water is the right second derivative to pull on. Where I’d push back: the market has recognized water. What it still can’t/doesn’t do is book it. The rights that clear at auction re-rate. The water two steps upstream of the data center doesn’t, because it isn’t legible yet. That gap is the trade.
This is exactly the market structure shift I’m watching.
The last cycle rewarded asset-light businesses because software could scale faster than physical constraints. The next cycle may reward the opposite: control over power, compute, commodities, infrastructure, logistics, and real-world capacity.
When scarcity moves from code to atoms, capital allocation changes. Margins, moats, and valuation multiples have to be rebuilt around physical bottlenecks, not just digital distribution.
That is the framework I care about: how macro scarcity transmits into sectors, balance sheets, and portfolio construction.
Thank you for your article, it raised some interesting points. I agree with your thoughts around the value of owning hard assets in sectors which have suffered from long periods of under investment. Particularly in sectors which need constant capital investment just to keep the supply stable like metals and energy producers. That reality coupled with rising demand, and long time horizons for new supply to come online after the moment a final investment decision has been made (years for copper, for instance). That means owning companies which have those hard assets today and will earn more if prices go up due to shortages can become one of the best trends in the years to come. I am certainly positioned like that. However, I disagree with your opinion that all capital light companies will do worse than they used to do. I believe there are some that will continue to do extremely well for the foreseeable future.
I am curious to read some more concrete ideas of yours after this big picture piece.