There was a popular legend from medieval Venice about an impoverished orphan from the island of Torcello.

The boy came to Venice at a young age, found a job, and worked tirelessly and energetically– enough to impress some of the city’s wealthy patricians.

Eventually the boy– now a young man– had built up enough credibility that some local noblemen entered into a commenda contract with him, i.e. a sort of proto-limited partnership. The idea was that the investors would finance a trade voyage (and stay comfortably at home in Venice), while the young man would risk life and limb on the high seas.

The investors would take 100% of the financial risk in exchange for 75% of the profit, while the orphaned entrepreneur would earn a 25% cut in exchange for risking his life.

The young man went off to sail the known world and came back with 10x his investors’ money. Ecstatic at the tremendous return on capital, the investors backed several other voyages… until eventually the young orphan boy with no prospects became one of the richest men in Venice.

No one knows if this particular story is true. But it’s emblematic of the incredible rise and peak of the Republic of Venice. 1,000+ years ago, it was truly the America of its day.

While the rest of Europe was toiling away in poverty due to the constraints of the ridiculous feudal system, Venice was like a rocket ship far ahead of its time.

Its entire society was built on economic freedom. ANYONE, from anywhere in Europe, could come to Venice, work hard, take risks, and make a fortune. It was the American dream seven centuries before there was an America.

Venice also prided itself on a strong rule of law, not to mention unparalleled political and financial stability. It became the richest place on the continent, by far, and its ducato (ducat) gold coin eventually displaced the Byzantine gold solidus as Europe’s major reserve currency.

But eventually, like most great civilizations, it peaked. Venice’s swashbuckling, risk-taking, hard-working entrepreneurial culture became complacent.

Rather than finance new trade routes and keep innovating, the great moneyed families of Venice were happy to sit at home and spend their fortunes on art and architecture. The government became clogged up with an entrenched political class that remained in elected office year after year. They became lazy, then incompetent, and then ultimately ran the place into the ground.

Meanwhile, other rising powers emerged on the geopolitical horizon– among them, the Ottoman Empire.

In the 1300s, the Ottoman Empire came out of nowhere as a ferocious competitor, ruthlessly conquering everyone who stood in their way. They were also shrewd at trade and commerce, and they posed a direct threat to Venice.

It was a classic historical case of a rising power against a declining power. And it seemed like war was inevitable.

And to be fair, the two countries did cross swords a number of times; history records these as the “Ottoman-Venetian Wars [note the plural]”, though realistically they were extremely limited conflicts, i.e. not full-blown total war in which both sides tried to obliterate one another.

The reason for the limited nature of the conflicts is simple: trade. Both Venice and the Ottoman Empire did a LOT of business with one another, and they both knew that destroying their adversary would be self-destructive.

So instead, they fought small, limited conflicts while continuing to engage in trade and commerce.

This is very similar to the US-China conflict that has already been going on for a number of years. We can’t even count the number of cyberattacks that China has waged on the US and US infrastructure. There will be more.

China has been buying up land across the United States left and right to stage military assets for further conflict. They’ve engaged in election interference. Stolen intellectual property. Flooded the US with Fentanyl. Brazen espionage, complete with honeypot sex scandals of high-ranking bureaucrats, business leaders, and politicians. And let’s not forget about the balloons flying over US military bases.

Over the weekend the US Navy announced that two military aircraft– a MH-60R Sea Hawk helicopter and F/A-18F Super Hornet jet– both crashed in the South China Sea while conducting “routine operations”.

Fortunately no one was killed, and all crew members were safely recovered. But aside from that, the Navy provided no further details.

Realistically there are two possibilities.

Either, one, it’s amateur night at the Navy again, where poor training, bad leadership, or DEI quotas resulted in yet another preventable accident. And if that’s the case, it’s even more embarrassing given that it took place in China’s backyard.

The more sinister possibility is that the Chinese navy disabled the aircraft.

China regularly deploys its extensive (and highly advanced) nuclear-powered submarine fleet throughout the South China Sea to deliberately frustrate global shipping and control the region.

They engage in electronic warfare, including signal jamming that takes out radar, navigation, and communication systems for commercial shipping vessels… which encourages them to avoid the South China Sea entirely.

The US military, on the other hand, routinely conducts counter-jamming operations, along with submarine tracking, in an effort to keep the South China Sea open.

The two militaries are essentially engaged with one another every single day… but without firing a single shot. It’s a very limited conflict.

This weekend it might have crossed a line. And it’s possible that China’s jamming operations might have taken out certain flight and navigation controls of the US military aircraft, causing them to crash.

That would be a blatant escalation, especially as President Trump and Xi are set to meet.

Having said that, I still think full-scale war is a remote possibility. Just like Venice and the Ottoman Empire, China and the US still need each other. China actually needs the US far more than the US needs China at this point, and in truth the Trump administration has worked hard to make sure that’s the case.

Frankly, war with China doesn’t even crack what I would consider the top five concerns facing the US right now—maybe not even the top ten.

We break this all down in today’s podcast—why these latest incidents matter, but also why the odds of all-out war are extremely low.

And I also weigh in on what I actually think is a much bigger concern for the US.

You can listen to the podcast here.

https://www.youtube.com/watch?v=9kHwCQzGRTo

You can access the podcast transcript here.