The New Rules

Episode Overview

• This episode explores the transition from a unipolar, ideology-driven world order to a multipolar, transactional reality where "Geo-Macro" economics dominates.
• The hosts analyze the shifting U.S. strategy toward Iran, arguing that Washington may be pivoting from regime change to pragmatic deal-making to focus on the Western Hemisphere.
• A major theme is the fragmentation of global institutions like the UN and EU, replaced by ad-hoc "coalitions of the willing" and a return to 19th-century power summits.
• The discussion challenges standard narratives on demographics, suggesting that cultural compatibility (in Europe) and AI automation (in Japan) can offset declining birth rates.
• Investors and observers will learn why "Fed watching" is becoming obsolete and how sovereign nations are reclaiming agency in a volatile, high-stakes geopolitical environment.

Key Concepts

• The "Blood in the Water" Theory & Desperation: The Iranian regime is currently viewed not as a strong adversary, but as one facing existential collapse due to economic isolation and unreliable allies (Russia/China). This creates a dangerous "blood in the water" scenario where the U.S. senses weakness and exerts maximum pressure. However, a desperate regime is often more volatile; Iran’s "nuclear option" is less about a bomb and more about its ability to commit economic suicide by disrupting global oil flows to ensure its own survival.

• The Escalation Ladder (Iran vs. North Korea): Deterrence capabilities differ significantly between rogue states. North Korea possesses a clear, granular escalation ladder (e.g., conventional artillery strikes on Seoul) without needing nuclear weapons. Iran, conversely, lacks this middle ground because its conventional missiles have proven ineffective. This leaves Tehran with only binary options: ineffective proxy attacks or catastrophic global energy disruption, making the region highly unstable.

• Transactional Realism & The Western Hemisphere Pivot: U.S. foreign policy is shifting from ideological crusades (regime change) to transactional pragmatism. The podcast posits a "Nixon in China" moment for Iran: the U.S. might cut a deal to neutralize the Middle East threat, freeing up bandwidth to focus on "Great Power Competition" in its own backyard—specifically Venezuela, Cuba, and Mexico—where Chinese and Russian influence is growing.

• Iraq as the Strategic "Jewel": Contrary to the media fixation on non-state actors like Hezbollah, Iraq remains the true prize of the Middle East due to its state status and massive oil production (4-6 million barrels/day). U.S. strategy is evolving to use Iraq as a lever to squeeze Iran, recognizing that controlling state-level assets is more critical than chasing terror groups.

• The "Veto Player" Problem & Multi-Speed Europe: As organizations like the EU expand, the number of actors who can block decisions ("veto players") increases, leading to paralysis. To bypass obstructionist members like Hungary, core nations (Germany, France, Poland, Spain) are forming a "Two-Speed Europe"—a coalition of the willing that moves faster on defense and finance, leaving peripheral nations behind.

• Syncretic Demographics: Raw birth rates are a misleading metric for economic health. The concept of "civilizational compatibility" matters more. Europe is currently benefiting from high-quality migration flows—Ukrainians in the East and Latin Americans in the South (Spain/Portugal)—that integrate quickly due to shared cultural, religious, or linguistic roots. This "cultural asset" allows for faster economic assimilation compared to other migration patterns.

• The Return of Summitry: The collapse of the UN's influence signals the end of the "Liberal International Order" and a return to 19th-century geopolitics. In this era, global problems are not solved by permanent bureaucracies but by ad-hoc summits between Great Powers. Middle powers must band together to avoid being exploited in this power-projection model.

• The "City-State" Thesis & AI: The traditional view that population decline spells doom is being challenged by the rise of the "City-State" model (e.g., Japan, UAE). Highly dense, technologically advanced nations can use AI and automation to augment a smaller population, maintaining high GDP and security without needing mass immigration or a massive standing army.

• Geo-Macro vs. Fed Watching: The era of obsessing over central bank interest rate tweaks is ending. We have entered the age of "Geo-Macro," where geopolitical realities—wars, tariffs, supply chains, and fiscal dominance—drive markets more than monetary policy. Investors must now analyze political risk rather than just reading FOMC minutes.

Quotes

• At 0:04:06 - "If you want to increase manufacturing competitiveness within your own country, compete with the rest of the world. Don't raise up a bunch of protectionist tariffs..." - Arguing that shielding domestic industries often stifles the innovation needed for real growth.
• At 0:09:58 - "Russia and Iran are not natural allies; they're actually competitors for Central Asia." - Highlighting the fragility of the anti-Western bloc; historical rivalries often supersede current alliances.
• At 0:11:54 - "I think that Donald Trump... smells blood in the water... I think that the United States of America feels that... this is the moment to exert maximum pressure on Iran." - Describing the current U.S. strategic calculus based on perceived adversary weakness.
• At 0:15:13 - "I think [the off-ramp] is an admission from the United States that... we can't pull off regime change... Let's start the Art of the Deal negotiating process." - Suggesting that diplomatic moves are an acknowledgment of the limits of U.S. power to force internal political change.
• At 0:16:15 - "The pain here is obviously the regime can go to the nuclear option and start deploying various assets to cause oil prices to double or triple." - Explaining the "suicide pill" nature of Iran's ultimate leverage over the global economy.
• At 0:17:02 - "North Korea really has 9 and 10. 9 is using conventional artillery strikes against Seoul which would decimate about a quarter of the city." - Contrasting deterrence models; some nations have gradual escalation options, while others only have catastrophic ones.
• At 0:22:06 - "Iraq is the jewel of the Middle East. It's not Hezbollah and Hamas... Iraq is a state. It produces 4 to 6 million barrels a day." - Reframing the Middle East map to focus on state-level assets rather than headlines about terror groups.
• At 0:27:46 - "I think that there is a window open... where Trump can pull off a Nixon in China type moment. This can be Trump in Tehran if he wants it." - Explaining the possibility of a pragmatic, non-ideological deal with an adversary to focus resources elsewhere.
• At 0:31:26 - "Keep your eye on the prize. Venezuela, Greenland, Mexico, cartels, Cuba. Focus, President Trump... You can do your nuclear deal shenanigans all you want with Iran." - Highlighting the strategic shift toward "Hemispheric Realism" over Middle Eastern entanglements.
• At 0:42:26 - "The more veto players there are in an organization, the less likely that organization is going to be effective." - A core political science framework explaining why large bodies like the EU become paralyzed.
• At 0:59:30 - "European civilization is... a syncretic civilization that exhibits a lot of integration throughout its history... America is 250 years old." - Why Europe may be better positioned to integrate certain compatible immigrant populations than the US.
• At 1:02:23 - "The UN was the perfect expression of the liberal international order... and it is literally going bankrupt in front of our eyes. Is there a better metaphor?" - How the financial failure of the UN mirrors the collapse of the geopolitical system it represented.
• At 1:05:36 - "We are fully today in League of Nations territory for the United Nations." - A historical comparison suggesting the UN has become a powerless observer.
• At 1:06:25 - "What matters is great powers... getting together and solving issues, and then middle powers kind of having to band together to not be on the menu." - Defining the brutal reality of the new multipolar order where sovereignty is dictated by power projection.
• At 1:13:53 - "We're in a world where macro is geo-macro. There is no other macro." - The core thesis that economic analysis cannot exist separate from political analysis in the current era.
• At 1:14:14 - "Fed watching is going to go the way of whaling." - A vivid metaphor explaining that the new geopolitical reality renders obsessive analysis of central bank minutes useless.

Takeaways

• Pivot Investment Focus to "Geo-Macro": Stop relying solely on central bank signals (Fed watching) for market direction. Incorporate geopolitical risks—supply chain shifts, tariffs, and conflict zones—as primary drivers of asset prices.
• Monitor the "Two-Speed" Breakup of the EU: Watch for investment opportunities in the "core" European nations (Germany, Poland, Spain) that are bypassing EU bureaucracy. These nations are likely to become more agile and invest heavily in defense and industry.
• Reassess Demographic Decline Narratives: Do not write off economies solely based on birth rates. Look for nations with "culturally compatible" migration (like Spain) or high automation adoption (like Japan), as they will outperform those with integration struggles.
• Watch for a US-Iran "Grand Bargain": Be prepared for a counter-intuitive diplomatic deal between Washington and Tehran. Such a deal would likely stabilize oil markets short-term but signal a long-term US withdrawal from the region to focus on Latin America.
• Focus on "State" Assets over Non-State Noise: In the Middle East, pay attention to the stability and output of Iraq (the state) rather than the daily headlines of proxy groups like Hezbollah. Iraq's oil flow is the true economic lever of the region.
• Track the "Western Hemisphere" Portfolio: Expect increased US policy focus and potential investment flows into Mexico, near-shoring initiatives, and stability operations in Venezuela/Cuba. Industries related to border security and hemispheric trade integration will likely benefit.
• Evaluate "City-State" Sovereigns: Consider Japan not as a stagnant economy, but as a model for the future. If Japan abandons austerity for fiscal stimulus, it represents a major opportunity in a stable, high-tech jurisdiction that is reclaiming its sovereignty.
• Prepare for "Summit-Based" Volatility: Global rules are gone. Expect sudden, bilaterally negotiated changes to trade and security (e.g., a sudden US-Russia or US-India deal) rather than slow, predictable changes through international bodies like the UN or WTO.
• Identify "Veto Player" Bottlenecks: When analyzing any region or organization, identify the "veto players." Avoid investing in markets dependent on consensus from large, paralyzed organizations; favor nations acting unilaterally or in small, aligned coalitions.