Machiavelli, often considered the father of modern political philosophy, focused heavily on what he called the “effectual truth”—the reality of what actually works, rather than what we wish would happen in an ideal world. He believed that maintaining prosperity requires a clear-eyed understanding of power and a ruthless grasp of human nature.

Right now, global markets, international security, and our own domestic economy are forcing us to take off the rose-colored glasses. Here is the effectual truth of what is driving the macro landscape this week.

1. The Geopolitical Contest of Economic Pain

The Strait of Hormuz has been largely closed since late February, pushing WTI crude above $100 a barrel and U.S. gas to $4 a gallon. While the market surged this morning on hints of de-escalation, the broader strategic lesson is alarming.

We are witnessing a shift away from conventional military deterrence toward a “contest of economic pain.” Adversaries are proving they do not need a world-class navy to inflict catastrophic damage on the West; they simply need the ability to choke off vital global commerce.

This is the exact blueprint China is studying for Taiwan. The risk isn’t necessarily a D-Day style amphibious invasion, but a gray-zone “quarantine”—a customs dispute that forces the global economy to capitulate without a single shot fired. The West urgently needs a strategy of structured ambiguity and an acknowledgment of Economic Mutually Assured Destruction, because right now, we are entirely unprepared for the economic fallout of our own deterrence.

2. The AI Pivot: From Hardware to Agents

In the markets, we’ve seen a violent rotation out of AI infrastructure names (like Micron, LITE, Coherent, and Ciena). This sell-off was triggered by Google’s new TurboQuant algorithm, which promises 6x memory compression. The debate tearing through the market right now is whether this massive leap in efficiency will kill hardware demand, or if it will trigger the “Jevons Paradox” - where increased efficiency actually drives wider adoption and consumption.

While the hardware side re-rates, the software side is accelerating. AI “agents” are moving rapidly from pilots into live production. The true promise of tools like Claude is the automation of the “coordination tax” and the staggering amount of friction, documentation, and internal repackaging required to get anything done in a large organization. AI-native startups are going to move with terrifying speed, while massive incumbents will have to drag their workforce into the AI era.

3. Canada’s Stagnation: Falling Behind Alabama

Bringing the focus back home, a jarring statistic has been dominating Canadian business circles: Canada’s GDP per capita has now fallen behind the state of Alabama. Over the last decade, our real GDP per capita grew by just 0.4% annually, dropping us below the OECD average for the first time in recorded history.

How did we get here?

* The Productivity Trap: A massive surge in temporary residents and cheap labor entirely disincentivized Canadian businesses from making the capital and technological investments necessary to improve productivity.

* The Fiscal Mirage: Government spending has ballooned from 38% of GDP to 45% over the last decade. Because GDP includes government spending, this deficit-financed public sector expansion has masked a severe depression in the private sector.

* The Brain Drain: The wealth gap at the top is driving our best talent away. Roughly 40% of Canada’s potential top 1% earners have emigrated to the U.S. seeking competitive compensation.

But as investors, we navigate the world as it is, not as we wish it to be.

My thoughts on the Iran conflict:

Iran’s main suppliers are the same people facing untenable, existential risk from Hormuz being closed for an extended period.

There are break points here where tens of millions or more die from starvation, cold, etc. Which people from all countries tend to be less than chill about.

Yes, the US has global rivals who would like to “beat” American over time, but nobody is trying to have a destabilized Asian continent.

*How* we have done what we just did (geopolitical equivalent to the Michael Jackson window baby approach to parenting) probably solidifies our handoff of the global mantle of leadership, which has profound long-term implications.

But there is a very immediate “we absolutely cannot f*****g have this” situation on the ground for the exact players who allow Iran to exist.

Hard to bear hug Iran while US and Israel are in “just kill everyone” mode. But whenever US and Israel are satisfied with the purge level, Iran will get bear hugged out of Hormuz. Or returned to the stone age courtesy of Huawei firmware.

Hormuz being closed for Developed markets is a material threat to standards of living. For much of the world, it would be death on an unimaginable scale. The press has misframed the stakes. Governments (and more proximate markets) understand the actual risk profile here, which is why they’ve traded so weak vs US

It’s going to take 5 to taco. None of which include Iran.

Oil is down 1% with market up ~4%.

Lots of work to do.

Below you’ll find all the best stuff I have been reading and watching.

Podcast & YouTube Recommendations🎙

* A Great episode that frames the current moment in markets from the Compound and DataTrek:

* A great conversation about Taiwan and Iran:

* Jamie Dimon talks about his legacy and the future of banking:

* Zeihan on how to break Iran:

Best Links of The Week🔮

* Ian Bremmer on the state of Iranian de-escalation - X

* Josh Wolf talks about the alternative approaches to Ai - Thread on X

* Getting on the right side of the ice. A great framming of software in today market. - Thread on X

* A fantastic presentation on the future of SAAS from Redpoint. - Redpoint Partners

* “Artificial intelligence drove chess toward perfect play, leading to more draws at top tournaments. Now grandmasters are winning by making less optimal moves... - Blomberg

* “Whatever the final outcome for Anthropic from its feud with the Department of Defense, the attention it has generated — coupled with the company’s funny Super Bowl ads taking aim at OpenAI and the surging popularity of Claude Code — has made Anthropic more popular with consumers than ever. -TechCrunch

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit reformedmillennials.substack.com