Navigating the new geopolitical and technology landscape

Geopolitical Context and Globalization Shift

• Geopolitical uncertainty has reached a 20-year high and is projected to persist or worsen over the medium to long term.
• The era of "hyper-globalization" ended prior to the pandemic, accelerating with the war in Europe and U.S.-China tensions.
• Major powers (U.S., China, Russia) are leveraging distinct comparative advantages: the U.S. dollar, Russian energy/food, and Chinese supply chain concentration.
• No single country or international organization currently possesses the capacity to arbitrate this emerging balance of power.

Emergence of Geopolitical Swing States

• A new category of "geopolitical swing states" is expected to hold significant agency over the next decade, influencing U.S.-China competition.
• These nations are categorized by their ability to pursue "multi-alignment" rather than aligning exclusively with one great power.
• Capital Deployers: Wealthy nations like Norway, Singapore, and Gulf states are willing to deploy disproportionate global capital.
• Supply Chain Gatekeepers: Countries like India (pharmaceuticals), Indonesia (nickel), Brazil (agriculture), and the Gulf states (energy/food) hold critical differentiated resources.
• Nearshoring/Offshoring Hubs: Mexico and Vietnam are benefiting by positioning themselves as attractive alternatives for manufacturing reshoring.
• Companies must now adopt country-specific, tactical strategies rather than broad regional approaches to account for these shifting "kingmakers."

Intersection of Geopolitics and Technology

• Reversal of Drivers: Economic interests historically drove geopolitics; currently, geopolitics is driving economic interests, particularly among great powers.
• Three Technology Categories Impacting Geopolitics:
  • Fundamental Enabling Technologies: Semiconductors and 5G are critical to national competitiveness.
  • Communication Channels: Platforms like WhatsApp, TikTok, and YouTube influence national sovereignty and democratic processes.
  • Disruptive Tools: AI, blockchain, AR, and VR promise tectonic shifts in societal and economic structures.
• AI Specifics: Generative AI (leveraging large language models) represents a unique shift due to its direct, conversational interaction with consumers, accelerating innovation speed.
• Critical Technology Attributes: Technologies become geopolitical flashpoints if they have national security implications, act as accelerants for other tech, serve as economic choke points, or provide significant competitive moats.

Governance Challenges and Future Outlook

• Impedance Mismatch: Government decision-making is slow and deliberate, while technological evolution is accelerating, creating a coordination gap.
• Failure of Multilateralism: Existing multilateral frameworks function well for physical world defense but lack structures for technological governance.
• Competitive Coexistence: The U.S.-China tech competition is asymmetric and will not result in a binary "winner-take-all"; instead, countries will likely pursue a "technological cocktail" approach to maximize efficiency within sovereign borders.
• Splinternet Risk: The fragmentation of the internet and digital standards into nationally bounded systems risks suboptimizing global efficiency.
• Time Horizon: The tension between technology evolving faster than political architecture is expected to define the geopolitical landscape for the next 5 to 7 years.

Goldman Sachs Office of Applied Innovation

• Mission: The office, co-headed by Jared Cohen (President of Global Affairs) and George Lee, aims to merge geopolitical analysis with commercial insight to provide "geocommercial" strategies for clients.
• Methodology: The firm seeks to reverse the traditional innovation sequence by applying regulated, compliant, and legal infrastructure before deployment in high-stakes, regulated economies.
• Differentiation: Unlike generic thought leadership, the office focuses on "applied innovation" that yields actionable commercial decisions and risk mitigation for clients.
• Case Study: The Middle East (Gulf states) is shifting from a "war on terror" focus to a "economic interests drive geopolitics" model, creating new opportunities in infrastructure, life sciences, and digital sectors.

Strategic Advice for Investors and Corporations

• Companies must anticipate second and third-order effects of U.S.-China decoupling and the rise of swing states.
• Success requires "reverse engineering" geopolitical trends from commercial anomalies observed in daily supply chain and business operations.
• Boards must prepare for a more complex environment where placing "chips" requires nuanced, specific bets rather than broad regional strategies.
• The combination of geopolitical risk analysis and commercial trend data creates a "one plus one equals three" opportunity for generating alpha.