"China Is A Generation Away From Collapse" The Truth Behind America's Greatest Rival! | Impact Theory With Tom Bilyeu & Peter Zeihan

Summary

---

Podcast Summary: "China Is A Generation Away From Collapse" – Tom Bilyeu & Peter Zeihan (Impact Theory, Feb 13, 2026)

Main Theme & Purpose

In this episode of Impact Theory, Tom Bilyeu is joined by geopolitical strategist Peter Zeihan to unpack popular assumptions around China’s future, the risks and realities of U.S.-China rivalry, and the broader forces reshaping global power. Challenging media narratives, Zeihan rigorously examines why he believes China cannot displace the U.S., predicts imminent civilizational collapse within China, and outlines how shifting demographics, deglobalization, and evolving political structures are remaking both the U.S. and the world. The discussion also branches into the impact of immigration, the challenges of assimilation, the disruptive role of media in democracy, and the high-stakes race between technology and aging populations.

---

Key Discussion Points & Insights

1. The Myth of the Thucydides Trap and China’s Prospects

• Definition & Context ([00:35]–[01:39])

  • Peter Zeihan explains the “Thucydides Trap”—the theory that a rising power inevitably clashes with the ruling power (U.S. vs. China).
  • Zeihan argues the overlooked historical reality: “In over half of the case studies… the challenging power was destroyed.”
    [00:45, Zeihan]
  • “It absolutely will not be the Chinese [that displace the U.S.],” Zeihan affirms. [01:35, Zeihan]

• Three Main Reasons China Won’t Supplant the U.S. ([01:39]–[04:46])

  • Political Dysfunction: Xi's consolidation has “frozen” policymaking; military leadership is now totally inexperienced.
  • Geographic Constraints: China boxed in by the “first island chain” (Japan–Taiwan–Philippines); historically failed to project naval power.
  • Demographic Collapse: The one-child policy, rapid urbanization, and official overcounting have led to an irreversible population implosion.
    • Zeihan suggests, “We are in the final decade of the People’s Republic of China and in the final 50 years of the Han ethnicity.”
      [04:38, Zeihan]

2. Mechanics of Chinese Civilizational Collapse

• How Collapse Unfolds ([05:30]–[07:50])

  • Recurrent cycles: central state collapses, warlords rise, massive agricultural breakdowns, population losses of 25–65%.
  • Zeihan: “China today is only possible because of the U.S. Navy. … If the U.S. Navy ever stops [protecting trade routes], we don’t even have to go to war with them for them to die.” [06:49, Zeihan]
  • Emerging demographic reality: “A mass depopulation event is almost guaranteed at this point.” [07:29, Zeihan]

• Geography & Fragmentation ([07:50]–[12:17])

  • China historically comprises distinct regions: North China Plain (largest population), Greater Shanghai, Pearl River Valley.
  • Internal unity is historically rare—regional pockets often thrive independently when central authority collapses.
  • “The moment that we’re in right now…all of China’s under one political authority—this really is the historical oddity.”
    [11:52, Zeihan]

3. U.S. Strategy in a Shifting World Order

• No More “Grand Bargain” with China ([15:42]–[17:45])

  • Xi’s system incapable of “good faith” negotiations; U.S. should focus on decoupling economically.
  • Zeihan: “The Chinese really are on borrowed time and are going to vanish before long.” [16:36, Zeihan]
  • U.S. must reshore industry, secure alternative suppliers, and reindustrialize—even if “not very capitalistic” ([17:58, Zeihan]).

• Should the U.S. Accelerate China’s Decline? ([18:29]–[20:19])

  • Primary concern: avoid dependence on China for essentials; fostering collapse could cause global economic disruptions.
  • “Once this breaks, it’s not going to slide, it’s going to collapse.” [19:14, Zeihan]

4. America’s Own Internal Friction & Political Transformation

• Demographic & Economic Stressors ([21:20]–[22:03])

  • Baby boomers retired; capital costs rising; workforce shrinking (smallest generation: Zoomers).
  • “We need to double the industrial plants in an environment of a shrinking labor force and a shrinking capital base…all of that is inflationary.” [22:05, Zeihan]

• Political Realignment & Dysfunction ([22:03]–[25:01])

  • U.S. “big tent” parties are fracturing; Republican and Democratic coalitions unstable and unable to govern.
  • “Neither of them can win an election anymore, it’s just a question of who loses more. … We’re looking at a period of extended political chaos.” [24:19, Zeihan]

5. The Deeper Drivers: Demographics, Deglobalization, and Media Disruption

• Beyond Economic Populism ([25:01]–[27:33])

  • Tom suggests turmoil is a result of economic policy (“K-shaped economy”) and cultural attitudes.
  • Zeihan: These are symptoms, not causes; the real shift is demographics, deglobalization, and new (disruptive) media.

• How Social Media Upends Democracy ([28:12]–[32:18])

  • U.S. slow to regulate digital speech; Section 230 (1996) made platforms not liable for content.
  • Comparison to historical disruption by the telegraph era.
  • Other countries now experiment with stricter controls (e.g., Brazil’s “Ministry of Truth,” European age limits).
  • “We will eventually figure this out, but…the idea that anyone’s going to get it on their first try is also a bit rich.”
    [32:09, Zeihan]

6. Immigration: Economy, Culture, and Assimilation

• U.S. Immigration Policy Paralysis ([34:45]–[36:48])

  • U.S. hasn’t reformed immigration since 1985; current stalemate creates an illegal underclass harming both economy and rule of law.
  • “Deliberately reducing that [immigration] to zero is incredibly stupid from an economic point of view.” [35:14, Zeihan]
  • Assimilation is essential to avoid underclass and lawlessness.

• Europe’s Demographics vs. Immigration Reality ([36:48]–[41:16])

  • Contrary to perception, most of Europe has very restrictive immigration. Spain and Portugal exceptions—success through colonial ties.
  • “Europe’s demographic issue is…their birth rate is so low…over decades, you get a demographic crisis. It’s not an immigration, it’s not a racial crisis almost anywhere.” [38:07, Zeihan]
  • Media narratives of unassimilating immigrants in Europe are overstated.

• Value Systems vs. Skin Color ([45:00]–[48:56])

  • Core issue is value-system assimilation, not skin color.
  • In Europe, “racism” is more about culture than appearance—e.g., French, Germans, Poles as distinct as any other differences.
  • “In the United States we see Germans and Italians and French and Brits as all white people…and so we only have a problem if the color of your skin is different. They have a problem if the food is different, if the dress is different..." [45:54, Zeihan]

• The Melting Pot Advantage in Settler States ([43:00]–[45:19])

  • America’s ongoing, steady inflow encourages assimilation; Spanish is "the most rapid disappearing language in America today".
  • Canada is slower to assimilate—more “ghettoization.”
  • Europe lacks both the historical pattern and structural capacity for assimilation seen in the U.S.

7. Aging Societies, Robotics, and the Limits of AI

• Japan’s Aging and Robot Strategy ([49:00]–[52:30])
  • Japan seeks to offset aging by aggressively pursuing robotics and AI solutions.
  • Improved, but “not going to solve their problem,” just buys “more time.”
  • AI (especially today’s LLMs) does little for demographic decline; the next frontier is physical automation.

---

Notable Quotes & Memorable Moments

• On the Chinese military:

  • “So their equivalent of the Joint Chiefs has no one who knows how to fire a gun or sail a ship. So the idea that the Chinese military is functional I find hilarious.”
    —Peter Zeihan, [02:00]

• On historical inevitability:

  • “There have been 29 civilizational collapses in Chinese history to this point…What about half of them have in common is the central state collapses, warlords rise up as regional powers…population loss of somewhere between 25 and 65%.”
    —Peter Zeihan, [05:30]

• On U.S. dependency on China:

  • “Making sure that China is not essential for anything that we need is really the bottom line.”
    —Peter Zeihan, [18:49]

• On U.S. political parties:

  • “The Republican Party has lost national security conservatives, business conservatives, law and order conservatives, and fiscal conservatives…The Democrats are actually in a worse position.”
    —Peter Zeihan, [24:03]

• On integration in America vs. Europe:

  • “Spanish is the most rapidly disappearing language in America today…That is the power that the United States has when it brings in other people.”
    —Peter Zeihan, [44:10]

• On media disruption:

  • “Section 230 … codified that anyone can say anything without risk to their income, to their personality, to their relevance.”
    —Peter Zeihan, [30:01]

---

Timestamps for Major Segments

• Thucydides Trap & China’s Fate – 00:35–04:46
• Mechanics of Chinese Collapse – 05:30–12:17
• Strategic U.S. Responses – 15:42–20:19
• U.S. Internal Friction & Political Realignment – 21:20–25:01
• Underlying Shifts: Demographics & Deglobalization – 25:01–27:33
• The Impact of Social Media – 28:12–32:18
• Immigration: Economics and Assimilation – 34:45–45:19
• Race, Values, and Assimilation Differences – 45:00–48:56
• Japan, Robotics, and the Limits of AI – 49:00–52:30

---

Closing

Peter Zeihan closes by pointing listeners to his free newsletter and books, sharing excitement for his upcoming fiction series, which dramatizes the very geopolitical dynamics discussed in the episode.

This episode challenges prevailing China narratives, reframes the conversation about global power transitions, and digs deep into the structural roots of current societal and political upheaval—urging listeners to see beyond headlines to the demographic and historical forces truly shaping the future.

Transcript

[Tom Bilyeu]

Hey, Sal.

[Peter Zeihan]

Hank. What's going on?

[Tom Bilyeu]

We haven't worked a case in years.

[Peter Zeihan]

I just bought my car at Carvana.

[Tom Bilyeu]

And it was so easy.

[Peter Zeihan]

Too easy. Think something's up? You tell me. They got thousands of options, found a great car at a great price, and it got delivered the next day.

[Tom Bilyeu]

It sounds like Carvana just makes it easy to buy your car, Hank.

[Peter Zeihan]

Yeah, you're right. Case closed. Buy your car today on Carvana. Delivery fees may apply.

[Sponsor/Ad Voice]

Welcome back to part two of this incredible conversation.

[Tom Bilyeu]

Without further ado, here we go. Okay, talk to me about why I. Well, one, tell people what Thucydides trap is, and then explain to me why I should not be concerned about that.

[Peter Zeihan]

Okay, so Thucydides trap is the idea that eventually you've got a system that is run by a major power, and then a new major power rises up and displaces the first one. Graham Allison is the guy who came up with the idea. And a lot of people have pointed to the rise of China eventually triggering the trap that causes a fight between the two that China emerges from. What most people miss, and what Graham Allison himself would underline, that everyone has forgotten, is that in over half of the global or of the case studies that he looked at going back 3,000 years, the challenging power was destroyed. So, yes, it's an interesting metric, but Americans always being a little bit paranoid, have always only read half of the argument. And while eventually there may well be a power that displaces the United States, it absolutely will not be the Chinese.

[Tom Bilyeu]

Okay, and so is this a demographic argument? Is this a Xi purge, isolating himself argument? What makes that such an impossibility?

[Peter Zeihan]

Well, let me give you three reasons, and there are more. First is the politics. Xi has basically become what Trump is attempting to do in the United States, and that's got all levers of power that are not him. And it means that policymaking has frozen and the ability of the leadership to make informed decision is gone. So, for example, just what was it? Was it in February? Last week of January, he gutted the Central Military Commission. So it's just him and now an inquisitor, and that's it. There's no one with any military experience on it at all. So they're equivalent of the Joint Chiefs, has no one who knows how to fire a gun or sail a ship. So the idea that the Chinese military is functional I find hilarious. Let's look at this from a geographic point of view. The United States basically occupies the best part of the best continent, has ocean Moats protecting it from everyone else. And when we talk about invasion, we're talking about migrants who want to work here. The Chinese system has a line of islands off the coast from Japan to Taiwan to the Philippines. That's called the first island chain that has boxed, boxed them in for the last 3,000 years. And there is only one example in all of Chinese history of a fleet ever pushing past it. And it basically sailed into Southeast and South Asia to do one trading one once, and that's it in 3,000 years. You combine that with the fact that most of their navy can't even reach the first island chain. And then of course, the United States has the world's largest expeditionary navy and Japan has the world's second largest. So the idea that there's a military solution here for the Chinese, for anything, is also hilarious. And then you've got the demographic issue. Two things. Number one, this is one of the countries that industrialized most quickly. So they went from the farm to the city most quickly, which means that half of the population now live in high rise condos and their birth rate is effectively zero. And then you have the one child policy on top of that, where for 40 years people were penalized from having kids. So China, according to the official statistics, now has the 10th lowest birth rate in the world world, and according to the official statistics, has had a lower birth rate than the United States since 1991. Unofficially, demographics. Folks in China are debating now publicly how many hundreds of millions of people they have overcounted their population and they're settling on something between 100 million and 300 million at the moment. If that is true, if we're closer to the 300 million, there are more people that are aged 54 and older than 54 and under in China. And we are in the final decade of the existence of the People's Republic of China and in the final 50 years of the existence of the Han ethnicity. So no, if the US is going to be displaced, it won't be by the Han Chinese.

[Tom Bilyeu]

It's really interesting. It's hard to internalize. But that doesn't mean that I'm not just chock full of a bunch of base assumptions that I'll topple one by one. Okay, so hey, like I said, you need think of me in no other way than I have realized that actually understanding what's going on has huge utility. And so being right has emotional utility. It feels good, but is very low utility in the real world. So yeah, I focus on actually understanding what's going On. So, okay, you've got the destruction of the Chinese civilization. So what do you mean by that? It will tear itself apart. Yeah. What does that actually look like? Mechanistically, believe it or not, X does.

[Peter Zeihan]

Not equal one in this situation. Does not equal one in this situation. There have been 29 civilizational collapses in Chinese history to this point, most of which would have been severe enough that if there was anyone smaller than China, they would have just vanished from the earth altogether. What about half of them have in common is the central state collapses. Warlords rise up as regional powers and start fighting one another. The agricultural system collapses because a lot of it is based on water management. And you have a population loss of somewhere between 25 and 65% of the population over a few years. And then eventually it pulls back together in some form. There are only three centuries out of the 3,000 years of Han history where China has actually been unified in a meaningful way. Half of that is under Bimongal occupation. The other half is under the globalized structure established by the United states. Because since 1945, we told the Europeans and the Japanese they couldn't have colonies anymore. And so for the first time in Chinese history, they didn't have to worry about their coast. And once Nixon came along, they were able to integrate into global economic structures and grow in a way they never had before in their history. China today is only possible because of the US Navy. So if the US Navy ever stops doing that, we don't even have to go to war with them for them to die. This would not be hard. What happens the next day could be a little awkward for us, but I'm really not concerned about Chinese survival or, I'm sorry, Chinese penetration or power as to what it would look like. Again, there's 29 examples. But a mass depopulation event is almost guaranteed at this point for demographic reasons alone. And if China loses access to the wider world, it's not just about energy and food, it's about the stuff that they need to grow their own. They are the most import dependent country on the planet when it comes to maintaining their own internal agricultural output. And if that goes away, for whatever reason, you're looking at people with an average age in the mid-50s having to go back to subsistence farming. That'll kill half the population of what's left right there. Wow.

[Tom Bilyeu]

Okay. That is a very distressing outlook. Is, is there something geographically based or culturally based about China that makes their civilization so prone to that collapse? And I asked that in the context of when I think about Mao, I'm so mortified by how many people he starved to death. But there's this cultural sense of better to have an iron fist ruling over you than to have the chaos. But what you're talking about is like that that chaos is very real. And that chaos may actually just from a death toll perspective, actually be worse than somebody like Mao. So what uniquely puts them in that position?

[Peter Zeihan]

We've got the external and the internal. So external, of course, is that first island chain that I mentioned earlier. So China can never integrate with the outside world on any terms that it sets itself. So it will always be vulnerable structures of whoever controls the first island chain, which in the modern day is a combination of Japan and the United States. Right now, this is the friendliest China has ever been with the powers that control the chain, believe it or not, you remove that, all the trade options that make China, China go away, and then they have to deal with their own internally. You've got the North China Plain, which is an area from maybe 200 miles north of Shanghai up to Beijing and beyond. That's where over half the population, closer to two thirds, probably lives. It's a big, wide, flat area. And when the Chinese talk about unity, they talk about that area all being under the same political authority. But what they ignore and what their history tells us over and over and over again is that unity just means one dude saying, this is mine, and if I don't get my way, that is how we define chaos. And so Mao was the most recent one to do that. Xi, of course, is his successor. And the idea that you can't have successful parts of China when they're not all on the same political authority is pure propaganda fiction. There's plenty of examples in Chinese history of pockets that have done very well for themselves when Beijing has been in chaos. Which brings us to the other parts. You basically have three ultra dense population clusters. The first one is Beijing Taijin or, excuse me, Tianjin in the north, which is the big cluster that has over 150 million people in total. Second one is Greater Shanghai at the mouth of the Yang Sea. And there are mountains and various geographic barriers that separate Shanghai from northern China. And so while northern China has been an area of warlords where anyone can basically do whatever they want unless it's ruled by an iron fist, Shanghai has always been more cosmopolitan or urban, more willing to deal with the outside world. And courtesy of the Yang Sea, it can integrate with a number of cities inland by water. But there's no way to march an army along that corridor because it's gorges in a lot of areas. So all of these cities integrate economically. They have their own identity and they've never really fought one another. So you can get all the way to Sichuan and Siju in the interior, a thousand miles from the shore, and you have an urban population that is very sophisticated compared to northern China that trades with Shanghai and the outside world. And it doesn't matter to them what happens in the north at all. Wall, they're separated. You go further south and you get into the Pearl River Valley in Guangzhou and Hong Kong, and that's the third big dense conglomeration. And it's only in this most recent version of China where that area has been tightly integrated into the rest of the Chinese whole for the almost the entirety of the rest of Chinese history, it's been its own place and it has integrated with the outside world quite willingly. In fact, if you look at all of the cities from Shanghai down to Guangzhou, that entire belt for the majority of the last 1500 years, they've gotten more food from outside China than from the rest of China. And the moment that we're in right now, where all of China's under one political authority, this really is the historical oddity by Chinese definitions, that's just not a convenient narrative for Beijing.

[Tom Bilyeu]

Yeah, to say the least. So taking a short break, but there's more impact theory after. Stay tuned.

[Sponsor/Ad Voice]

Let's talk about the business decisions you're making blind. It's 11pm an overseas supplier just offered you a bulk discount, but it expires tonight. You need to know, do I have the cash? Will this inventory actually move? What's my burn rate right now? And if you can't answer those questions instantly, you're just guessing. NetSuite by Oracle eliminates the guessing. It's the number one cloud ERP trusted by over 43,000 businesses. It's a unified suite that brings your financials, inventory, commerce, HR and CRM into a single source of truth. That connected data is what makes your AI smarter. So it doesn't just guess. It knows if your revenue is at least seven figures. Get NetSuite's free business guide right now, Demystifying AI. Go to netsuite.com theory. The guide is free to you at netsuite.com theory. Again, netsuite.com theory.

[Tom Bilyeu]

Let's talk about a problem you just can't solve on your own. You'd need to quit your job for like six months just to remove your data from the Internet. Your personal information is on hundreds of data broker sites right now. Your address, your phone number, your email, even your Social Security number. You can remove it yourself, but it would take hundreds of hours to track down every site and submit removal requests.

[Sponsor/Ad Voice]

And that's just round one.

[Tom Bilyeu]

Your data reappears constantly, so you'd have to repeat the process every few months. It is designed to be impossible. Incogni, though, solves this problem. They track down your data across hundreds of sites and remove it automatically. You authorize them once, then they handle everything. They keep removing your data as it reappears. Just go to incogni.com impact and use code impact for 60% off an annual plan. Try it risk free for 30 days. Just go to incogni I n c-o g n I.com impact and use code impact to checkout.

[Sponsor/Ad Voice]

Indoor air is loaded with allergens, viruses, smoke particles, mold spores, all kinds of invisible contaminants that mess with your energy focus and overall health. Most air purifiers cannot touch these microscopic threats. They're built to handle the obvious stuff, not the particles that actually matter. Air Doctor is different. It captures particles 100 times smaller than standard HEPA filters can catch, eliminating 99.99% of the dangerous contaminants in your air. Newsweek even named it Best air purifier. And 98% of customers report their home's air feels cleaner and healthier. Head to Air Doctor Pro and use promo code Impact to get up to $300 off. You get a 30 day money back guarantee plus a three year warranty, an $84 value for free. Again, that's airdoctorpro.com and be sure to use promo code Impact.

[Tom Bilyeu]

Thanks for staying tuned. Now let's get back to it. If you're America and you want to maximize American prosperity, but we are where we are in terms of the changing world order, what would the right play be for China? It sounds like we could choke them out, make things very difficult relatively easily, especially if we're operating in a coordinated way with Japan. Is that the play? Or do we want to try to thaw whatever ice is forming there and continue the globalization party?

[Peter Zeihan]

I would argue that China is no longer capable of negotiating a meaningful deal in good faith. Their system has been more gutted than what Trump is doing here. So they're basically locked into whatever it is that Xi thinks at the moment. When he wakes up for the day. He may be more internally consistent than Donald Trump, but he actually has fewer levers to control his system through because he's Basically killed so many people or gutted them or intimidated them into just being toadies. So I don't think there is a grand bargain could happen. Ten years ago, maybe, maybe there could have been, but not now. Which means that for the United States, you're taking an open, honest look at this, and you know that the Chinese really are in borrowed time and are going to vanish before long. You've got to prepare for that day, and you have to look at the things that China produces that we don't and figure out how you want to source that from somewhere else. Processing is part of that. Assembly is part of that. And the sooner you do that, the sooner you prepare, then the less China matters to us. And if someone else in the world decides to go the other direction and double down on the relationship with China, you know, that long run, you can start to write them off, too. But that requires a significant change in mindset, and it requires something that we're not very comfortable with doing here in the United States. An industrial policy that isn't very capitalistic. But like I said, the economic model is going to fail anyway. The sooner we get started on this, the more options we have for however we define ourselves in the future.

[Tom Bilyeu]

All right, and it's not capitalistic because you're saying there are going to be industries you have to transfer back from China to US Soil. You're going to have to incentivize it, put federal dollars towards it, and not just let the market decide.

[Peter Zeihan]

Yeah. One of the reasons that I think Biden gets a little bit of a bad rap, I mean, he serves a lot of it a bad rap, but when I look at the CHIPS act or the Inflation Reduction act, and I looked at the things he was investing in, I. I thought 80% of them were stupid, but we roughly need to double the size of the industrial plant in the United States. And even if we're building the wrong thing in the wrong place, we can always retool it. And if we get the concrete into the steel in the ground, great. Because it's always better to do it the day before you need it.

[Tom Bilyeu]

Okay, so the smart play. Reindustrialize America carrying over something you said earlier, trying to build alliances with nafta, ish, whatever that looks like, and moving forward with that assumption, accelerate China's decline or just leave it alone.

[Peter Zeihan]

You know, that's a strategy play. There's a lot of ways you could do this. Granted, with every day that goes by, our options narrow, but making sure that China is not essential for anything that we need is really the bottom line. That's a domestic play, that's an industrial play, that's an ally play. If you decide you want to accelerate the decline, you do need to be careful because once this breaks, it's not going to slide, it's going to collapse. The government is one system. They don't have a consumption base. And once the agricultural or the energy system snaps, you're not just looking at a recession or a depression. You're looking at a deindustrialization event that will build its own speed very, very.

[Tom Bilyeu]

Quickly in China or you're worried that it spreads.

[Peter Zeihan]

Yeah, got it. Oh, well, you know, if China, when China collapses, based on how countries have or have not prepared, we will have an expansion of the problem. I doubt we're going to have the decivilizational event for most of these other trading partners. Like, like just, just, just to pick one. Australia, their largest trading partner is now China. They primarily send raw materials there that they purchase. If China were to disappear tomorrow, they're obviously going to go through a horrific depression as everything is priced differently. But then the world will start to adjust and other countries will step into that gap. And a lot of those countries are in Southeast Asia, which the Australians have pretty good relations with. So you'll see those markets readjust over time. But over time is not a day.

[Tom Bilyeu]

Okay, so you're painting a very clear picture. You're certainly, you have an internal consistency to your logic. A lot of making this work would require America to have its act together, to be able to act in a thoughtful manner. I'll.

[Peter Zeihan]

Lovely thought.

[Tom Bilyeu]

Yeah. I'll set Trump aside simply because one, barring something that I can't foresee, he's not running for a third term. So maybe we've got three years of let's just see how much damage full ID can do. Maybe we have my more optimistic view of there's at least some strategy there. But either way, I want to look at a world where we understand what's causing America's internal turmoil. That isn't Trump. So removing Trump, what are the friction points that are still left? What do we have to contend with here before we can move forward?

[Peter Zeihan]

Well, well, we've already dealt with the manufacturing system, so let's not revisit that. On the demographic front, the baby boomers are almost entirely retired now. They've taken their capital and put it into relatively low velocity investments. So the cost of capital has risen. It's going to continue to rise for at least the next decade on the Younger side, the zoomers are the new generation. They're the smallest generation we've ever had. So we know the labor force is going to shrink every year for at least the next 12. So we know labor costs have to go up even before you consider the demands of re industrialization. And that's going to remake the economic model and generate all kinds of economic and political stress at every level just because of that, because things are just.

[Tom Bilyeu]

Going to get more expensive to entice workers.

[Peter Zeihan]

Well, we need to double the industrial plants in an environment of a shrinking labor force and a shrinking capital base, even before you consider immigration policy changes. So all of that is inflationary. There's no way around that. If we do it right, it's still high growth seeing that today, but it should be. But we are losing access to the inputs that are necessary to make this change work. And with every day that we wait, everything gets more expensive. Because if you have to do it, you can do it fast or you can do it cheap. And by delaying we're forcing ourselves to do it fast. And that's going to just be pricier. Third, we have a first past the post single member district electoral system, which is a really over complicated way of saying you vote for one person who will represent a specific number of people in a specific geography and that will always lead to two big tent parties because you have to get one nominal vote more than the other guy. If you have nine parties, eventually they're going to consolidate. That works until it doesn't. When you have big changes in demographic patterns, which we've had, in economic patterns, which we've had, in international relations or strategic relations, which we've had, the factions that are under those tents move around and sometimes they jump ship and eventually enough of them move that you get a new party system. But figuring out what that new party system takes one to four electoral cycles. And in that time, in that inner egnum, things are really chaotic. And that's where we are today. The Republican Party has lost national security conservatives, business conservatives, law and order conservatives and fiscal conservatives. It has now been constrained down to religious conservatives, whether they're Protestant or Catholic, and a smattering of age based issues for older folks. The Democrats are actually in a worse position. They've lost the youth vote, they've lost the labor vote, they've lost the Hispanic vote. Neither of them can win an election anymore. It's just a question of who loses more. And until this changes and these factions move around into a new, more stable environment for our current situation. We're going to be in a situation where the Republicans in their current form are a one man show and the Democrats are a circus and these are not governing structures. So we have to wait for the American people to form a new political alignment, whatever that looks like. I really doubt we're going to get that in three years. So we're looking at a period of extended political chaos in this country until that happens. And unfortunately it's happening at the moment that the world is going through the greatest shift in at least the last 80 years and arguably the last 500 hundred.

[Tom Bilyeu]

Wow. Okay. So I look at this through an economic lens when I try to figure out what has driven this kind of populism historically. You just see economics over and over and over. So I attribute a lot of this turmoil that we see in the US to a K shaped economy and the long march to the institutions where you have a growing belief in say, open borders, Social Security, not the exact right word, but entitlements for all. You've got the rise of concepts like nobody is trespassing on stolen land or you know, whatever the recent statement was by Billie Eilish that's caused so much backlash. But you put all of that together and you've got some people that believe that immigration is causing problems, other people that believe that the doors should be wide open. And it's what I call some people need to be chased by a lion. I believe that part of what's happening is things have been so good for so long. People think prosperity and growth are just natural, that they just happen and that you don't have to fight hard for it. You don't have to position yourself on a global stage. You don't have to have strong borders. You don't have to have means testing before you give somebody a handout. It's a pejorative word and I don't mean it like that. It's just the first thing that comes to mind. So getting, I think getting people to understand how difficult it is to generate taxable income as but one, for instance is very important. And the fact that people have lost touch with that is a big part of the chaos that we see here. Do you see a different underlying driver? Do you think that's completely crazy?

[Peter Zeihan]

I don't think it's crazy. I think most of those though are symptoms of the moment that we're in rather than the cause. This, if you think about what's happened in the last 30 years, the baby boomers were our dominant producing and consuming class. Now they're all retired changes to financial incentives. We were at the height of globalization or now we're going through de globalization. We had the economics and security system of the Cold War. Now we're clearly in a different space. It used to be that we had broadcast media, now we have social media. Of course we're going to manage our political systems differently with all these changes and what you just described described where a lot of these things that are inconsistent with how we used to be or people who for various reasons see the old system as no longer working in this era. This is what causes a political reshuffle. And that's where we are.

[Tom Bilyeu]

Okay, so the big breakdown of my theory is that there are more underlying causes. I'm sort of stepping into the game at a level where you're looking at.

[Peter Zeihan]

From a very tactical point of view. And I agree with everything that you said. It's just that we're dealing with a much broader shift here. And what you're seeing is the manifestation of that shift in real time.

[Tom Bilyeu]

Okay, so the shift for you isn't necessarily the right starting point. Is not looking at the K shaped economy. The right starting point for what has really shifted is demographics, de globalization and basically a change in media and the way that we interface with who has.

[Peter Zeihan]

The most voice and how far it can carry.

[Tom Bilyeu]

Interesting. I'll say it another way, just a gut check to see your reaction to this. I think the, the biggest problem with social media isn't that there are no gatekeepers, which is wonderful and certainly has consequences. It is that without gatekeepers we don't realize that there it is very difficult to ascertain what is objectively true. And so we suddenly come face to face with the reality that has always been true. But broadcast media masked it, which is that truth is very hard to come by. It's really perception. And so now a couple.

[Peter Zeihan]

Yeah, please. A couple of thoughts on that. Number one, this isn't the first time that we have had a new method of media or information transmission that has been disruptive. The last really, really big one was the tele. And if you go into the world before reconstruction, basically each political party at the local level had their own newspaper where about 80% of the print was just them lying about the other side. Ah, fun. And that didn't matter because it was all local. Even New York magazines and newspapers didn't have a big circulation because we didn't have a railroad. Telegraph comes along and all of a sudden everyone's lies could be transmitted wherever. And that got us into the Spanish American War. And in the aftermath of the Spanish American War, we had a series of court cases that made it illegal to deliberately lie, which we now call libel laws. That carried forward and eventually brought in all print and all mass media, including television and radio. But if you Fast forward to 1996, when the Internet was starting to boil up, the decision was made by Congress that we can't regulate speech, mostly because we, we don't know how. And so we got something called the, let's see, the Telecommunications act of 1996, which said that anything that was put on this new medium, this digital medium, the people who said it weren't liable, and the people who transmitted it were not liable. And so we set up the kind of the perfect storm for the growth and expansion of digital services on the Internet at the cost of codifying that anyone, anyone can say anything without risk to their income, to their personality, to their relevance. And that's given us where we are now. So in the United States, we are very behind the ball in regulating this space and trying to come up with a more intelligent way of managing it. And that's not new. Remember that if you go back to the telegraph, it wasn't Congress that did that, it was the courts, because so much had gone so wrong for so long and the damage was so extreme that eventually the court courts stepped in. If we wait for the courts this time, it's going to be at least another decade, I'm sure. But if you look at the rest of the world, which has a different legal tradition, they're now starting to come to grips with it and we can argue whether they're doing it right or wrong. The point is they're trying. And so we have a country like Brazil that is now establishing a formal, to use a very loaded term, Ministry of Truth, where it's their job to decide if what there is the truth, truth or a lie. And if you have lied and you know you have lied, you are now criminally liable. In other words, do you like that.

[Tom Bilyeu]

Or does that scare you?

[Peter Zeihan]

Some version of this has to happen. I'm glad they're experimenting with it instead of us. I don't have a solution. But then you look at Australia or Spain or now Greece and Slovenia just as of today, and they're just saying if you're under a certain age, you can't access it because it's no longer safe, because we don't know how to make it safe. That strikes me as a reasonable mid step. But we will as a country, as a species eventually figure this out, but the idea that we're going to do it in the first 10 years of the existence of the technology is a bit rich. And the idea that anyone's going to get it on their first try is also a bit rich.

[Tom Bilyeu]

We're hitting pause for a moment, but there's plenty more ahead, so don't go anywhere. Are let's talk about a lie that you've been sold. Most people think expensive clothing equals quality. They are wrong. You're paying for middlemen. You're paying for brand markup. You're paying for everything except the actual materials and craftsmanship. That cashmere sweater with a $400 price tag costs a fraction of that to make.

[Sponsor/Ad Voice]

The rest is profit margins stacked on profit margin.

[Tom Bilyeu]

Quince eliminates that entire system. They work directly with top factories. No middlemen, no inflated retail markup.

[Sponsor/Ad Voice]

Just premium materials at actual cost.

[Tom Bilyeu]

I got a cashmere sweater that is softer than anything that I've paid triple for. Refresh your wardrobe with Quince. Go to quint.comimpactpod for free shipping on your order and 365 day returns. Now available in Canada too. It's spelled Q-U I N C E.com impactpod free shipping and 365 day returns. Quince.com impact pod ready to relax in.

[Sponsor/Ad Voice]

Your dream bath retreat without the stress of figuring out every detail yourself? At the Home Depot, your bath upgrade is covered. Shop fully designed rooms and curated bath collections to go from inspiration to transformation. Fast savings of up to 40% will make it easier on your budget and find everything you need from tubs to toilets and all the tile in between to bring your vision to life. The Home Depot Dream Baths built here.

Starting a business can seem like a daunting task unless you have a partner like Shopify. They have the tools you need to start and grow your business. From designing a website to marketing to selling and beyond, Shopify can help with everything you need. There's a reason millions of companies like Mattel, Heinz and Allbirds continue to trust and use them. With Shopify on your side, turn your big business idea into Sign up for your $1per month [e-mail] SpecialOffer.

[Tom Bilyeu]

Thanks for sticking around. Let's get right back into the action. Very interesting. Okay, where do you think immigration? Mass immigration, very specifically ranks on our list of things that we have to contend with or it's going to tear us apart.

[Peter Zeihan]

The United States has not had meaningful immigration reform since 1985, and the idea that the US should be able to Decide who comes in and how is obviously true. But unless, until we get immigration reform, we have, on both sides of the political aisle, deliberately made that impossible. So I don't like what's going on with ice. I really don't like what's happening on the border. And when I look at the demographic situation for the United States, immigration has been part of our success going back 150 years. Deliberately reducing that to zero is incredibly stupid from an economic point of view, from a cultural point of view, I kind of get it. But that requires Congress to. To do something.

[Tom Bilyeu]

Can you elaborate on the cultural side? Why do you kind of get it?

[Peter Zeihan]

Sure. Well, I mean, if you have an unrestricted immigration system where people are not registered and you create a permanent underclass of people who are not assimilated, then American culture, by definition, is going to be competing in its own front yard. In addition, if people can't get assimilated, if they can't become legal status, they can't get things like a bank account, which means they're operating in the cash economy, and they won't go to the police if there's a problem. So all of a sudden, they're not just being preyed upon. We have deliberately then created an underbelly that undermines rule of law at every level. None of that is good. But if everyone has legal status, then all of a sudden, they can go to the cops, and organized crime can't get grips, and the cartels can't spread across the border nearly as easily. So this netherworld we're in, in the moment, where we prosecute migrants but also deny them regularization options, we've created the perfect storm to increase the crime rate, to make sure organized crime can spread, to make sure that drugs can get into every community very, very easily. At the same time, we're gutting the labor market. And at a time when we're already in demographic decline, there's nothing about this moment on either side that makes any sense to me.

[Tom Bilyeu]

When you look at Europe and. Because I. I feel like you can look at Europe and see, call it a decade into the future of what it looks like when you don't. When you have a large immigrant population that is not assimilating. And I certainly look at Europe and go, I get it. You guys have terrible birth rates. You know, take Germany, for instance. So I get why they're using an immigrant population to try to bolster those numbers. But at the same time, what happens to Germany when there's no such thing as a German identity?

[Peter Zeihan]

Okay. I hope this doesn't piss you off, but most of the numbers just don't support that at all. Europe has some of the strictest anti migration policies on the continent, after Japan, I'm sorry, on the, in the world after Japan and Korea, with the exception of Spain, specific exception of Spain and Portugal, most of the rest of Europe is very hard to migrate to. And when you look at countries like Germany, there have been, for lack of a better phrase, asylum offense. So under MERKEL we had one, one year where they let in about 800,000 people. And in the years since, it's been like 15% of that number. Europe's demographic issue is that they urbanize to such an extreme that their birth rate rate is so low. And you play that for decades forward, you get a demographic crisis. It's not an immigration, it's not a racial crisis almost anywhere. Again, exception being Spain and Portugal, where they have deliberately gone out and attracted people from their former colonies to kind of flesh out their numbers. And in the case of Spain, specifically, case I'm very familiar with, it's actually worked really well because they're all Spanish speakers, they're all descendants of Hispanics that came from Iberia. And the integration has been pretty, pretty straightforward.

[Tom Bilyeu]

Okay. So when you look at some of the pushback in those countries, whether it is Germany or the UK or take the Netherlands or even Brussels, where certainly there is a. Unless you tell me that I am just not seeing true numbers, you're seeing a dramatic surge in the ratio of either native, call it UK people from the UK or you might not have just come, but you're the first generation born to an immigrant family and obviously seeing a lot of turmoil in these countries from where I'm sitting, because you have a values clash where you have a new country coming in or new population coming in that does not share the values of the people that have been raised for generations in that place. So as an outsider looking at that stuff, it feels like that's escalatory. Am I misreading the situation? Falling for propaganda?

[Peter Zeihan]

I think you're falling for the propaganda. It's not that there's not an anti migration sentiment in Europe. I'm saying that the anti migration sentiment in Europe is so centrist that this is arguably the most racist part of the planet after again, Japan and Korea. And so you're listening to a few voices on the extreme edge that manipulate the numbers and the narratives to carry that story, however they carry it. But even the centrists, even the leftists in Europe are Deeply racist about outside cultures. It's one of the reasons why there's been so much pushback to the European project all along, multi decades. There just isn't that sort of deep surge of immigration that we in the United States think exists over there. Until you got to this year, the United States has always had a greater percentage of the population imported from foreign sources than the Europeans have, again, with some very specific exceptions. So, like you put at Brussels, for example, Brussels is a horrible, horrible place, but it is not Europe. It's not even Belgium's, not even a country. The northern half is Dutch, the southern half is French, and Brussels itself is independently a city state. So what you're saying might be true, and in Brussels, but that's because nobody else in Belgium wants to go there.

[Tom Bilyeu]

Okay, very interesting. So this is a radically different perspective than certainly the worldview that I have formed. So you're saying demographically, by the numbers, the immigration rates in these countries is relatively small. I thought I had even heard you speak to Germany, being in a position where over the next, whatever, 20, 30 years, Germans would be a minority in their own country.

[Peter Zeihan]

Okay, that was a. But purely hypothetical, if you want to use immigration to address your demographic crisis and you have not used immigration historically like the Germans in the German situation specifically, in order to hold where they are right now, to not have the average age increase, they need to bring in 2 million people a year every year from now on, and all of those people have to be under age 25. If you do that 20 years from now, Germans would absolutely be a minority in their own country. Plurality at best. It's just that example is to give you a scale of how far down the path most countries are. Germany specifically, in this example.

[Tom Bilyeu]

So why, though? My base assumption is that if you bring in immigrants from a country where there isn't a ton of overlap in terms of value system. And part of the reason I feel like America's been able to assimilate Hispanics is that they're largely Catholic. And so from a value system standpoint, it's just not a huge leap. And so that has made sense to me. But when you look at. If you have a values collision where, let's say you're not pulling from two religions that share a lot of core values, that you can end up having trouble there. One, do you agree with that assessment? And then two, if we do agree with that assessment, what's the strategy like? Is this just. Nope. This is just how the world goes. And it's been happening like this Forever or is there a rational response for a government to take the the difference.

[Peter Zeihan]

Is how your culture can assimilate versus not so historically speaking. The settler states, that's Canada, the United States, United States, New Zealand, Australia and Argentina. None of us are from here. And so it's a lot easier for these melting pot countries to bring in immigration. And if it happens in a relatively regular timeframe, year after year after year after year, the assimilative power of the home culture holds just fine. And it certainly has here because you're never bringing in more than 1 or 2% of your population and new people in a year and then they integrate. So for, for example in the United States here might blow your mind. Spanish is the most rapidly disappearing language in America today. It is very rare for second generation Mexican Americans speak to speak more than a few phrases. That is the power that the United States has when it brings in other people. That's not as true in Canada. Canada follows an almost ghettoization approach to integration where there are large portions of the major cities where specific ethnicity has created a cell. And for all practical purposes the ethics of their home country still exists there. It generates more numbers, it keeps their tax revenue higher, it stabilizes their labor force because they're bringing in more people. But it's also causing a real problem up there from a cultural assimilation point of view, which is something that will manifest over the next several decades. We don't have that here in Europe because they didn't start immigration in any meaningful way until relatively recently. The assimilative characteristic that we have just doesn't exist. And so you're getting kind of a Canadian style concentration and that is blowing the minds of people in say the Netherlands or Germany or Italy because it's just such a new experience from them or from their point of view. Nguyen Their lifetimes. If you go back before say 1880, pre industrial this was normal for Europe. But they fought about it a lot.

[Tom Bilyeu]

They fought about getting people to assimilate or they fought against just they just.

[Peter Zeihan]

Went to war with one another. The only difference between the Nazi area and the pre Nazi era is that the Nazis had industrial technologies to carry out the genocides as opposed to doing it door to door.

[Tom Bilyeu]

Europe is the most.

[Peter Zeihan]

Europe is the most blood drenched place in the world historically speaking. And post 1945 Europe is as much an aberration in their history as post Nixon. China is.

[Tom Bilyeu]

Okay, at the beginning of this you were saying that this is largely a function of racism or that's certainly how I took it. But when Europe was fighting Europe. It's a bunch of white people fighting a bunch of white people. So that, to me, speaks to. Because my thesis is, you're implanting American.

[Peter Zeihan]

Views of race on European views of race.

[Tom Bilyeu]

Oh, say more.

[Peter Zeihan]

In the United States, we see Germans and Italians and French and Brits as all white people. And that's all okay. And so we only have a problem if the color of your skin is different. They have a problem if the food is different, if the dress is different, and they see the French and the Germans and the Poles and the rest is very, very, very distinct people.

[Tom Bilyeu]

Interesting. So to me, that distinction matters a lot, certainly in an American context, because we obsess over skin color. And when I look at this, what I'm trying to get people to understand, and, man, if you've got an argument against this, please shoot it down. But the way I see it is worry exactly 0% about skin color and worry 100% about value system. And so what I hear is, well, is it accurate, though? So I'm trying to get to the architecture of the human mind, and maybe you're saying, nah, you need to play out the architecture of the human mind in a specific national context, and maybe that's more accurate. But when I look at Europe, what I see is you now telling me, yeah, this whole idea of values played out long before we had to worry about skin color. People are going to fight about food, about national origin. You don't even need to get to skin color. Which tells me that the problem is exactly sort of as foundational as I thought it was, which is, yeah, your skin doesn't matter. Your value system matters a lot.

[Peter Zeihan]

In the United States, we overplay that in different levels, but there are very few places. Let me phrase that differently. There are very few places in Europe where both of those don't exist. So I think the best example there would be France, because France had an overseas empire. And like the Spanish and to a lesser degree the English, they have brought in people over the last couple of generations from their empire, made it easier for them to immigrate. But France has this weird little duality. So France is the country that invented multicultural integration after the terror and the Revolution. And they basically agreed that everyone who lived within the boundaries of France, whether you were French or Norman or Basque or anything else, you were now all French egalitae fraternity. But anyone who's come in since doesn't qualify unless their cultural identity is perfect. So, for example, in the former French colonies, you've got Quebecois from Quebec, they're okay. You've got black French speakers from Sub Saharan Africa who are Christian. They're okay. And then you've got Algerians, who are the richest of the group. The most educated of the group speaks the best French of the group, but they're Muslim and they are not okay. But it's France, and we're all equal legally. So you can't even carry out a reasonable census. It's unconstitutional. So officially, legally, everyone's the same. We're all one big happy family. Unofficially, they don't even even know what the racial breakdown is of their country because it's unconstitutional to ask. That's interesting.

[Tom Bilyeu]

I didn't know that.

[Peter Zeihan]

France is wild. I love it.

[Tom Bilyeu]

Yeah, that. That is very fascinating. Okay, well, the final card in the immigration thing is you look at Japan. Be very curious to hear if this is your read of the situation, but it seems to me like they're playing the technology card and they're saying, listen, Japan is for Japanese robots, AI. That's how we're going to solve this problem. Is that plausible, or does the AI robotics thing just have a limitation that we're going to smack into?

[Peter Zeihan]

Well, they've had a robot Strategy since the 80s, and technology has come a long way, especially with actuaries or. Sorry, actuators, not actuaries. That's not a tax thing. Actuators to make it more accessible. And when you have the world's oldest demographic, things that are very simple, like changing a bedpan, if you can automate that, all of a sudden a lot of things open up for you. So their hospitals are becoming more and more automated, for example, their manufacturing is becoming more and more automated. I'm not saying it's going to solve their problem, but every little innovation buys them some more time. And really, a lot of the world right now is in a race against time. It's, do you age faster than you can compensate with the technology? Japan has also encouraged young people to have kids. Kids in a way that has been more successful than in most countries, still not getting them up to replacement rate. But it's changed the numbers enough that they're no longer the world's fastest aging society. So Germany, Italy, the Netherlands, India, Thailand, Taiwan, and of course, China are now all aging faster than Japan. Japan just had a big head start as to whether it will work. The technology question is, of course, questionable because I can't tell you what's going to look like in five years. Right now we are in a moment with AI where everything, everything, everything is locked up in large language models. And the building boom we have in the United States with data centers is all based around that one subset of AI technologies. It's not that the rest aren't having interesting things happen, but it's 100th the pace. And so it's LLM LLM, which means you need lots of GPUs in a single place where you can cool them, and you need lots of power for that. And you need data center after data center after data center. That is no use in dealing with demographic decline. That's a very specific type of AI, which I would argue doesn't have a much more Runway ahead of it. But I'm getting ahead of myself. You need machine learning and you need to interface AI with physical manipulation of the real world. That's a manufacturing issue, that's a human management issue, that is a healthcare issue. Those are where those breakthroughs need to come, and we're not seeing them happen very quickly right now. That could change in two years. If you go back just nine years, no one was talking about LLMs in any meaningful way. It didn't make the top five list of the AI things people were investing in. And then all of a sudden there was one breakthrough in around 2016, and the world changed. Now we got ChatGPT and Claude and Anthropic and all the rest. And it's really interesting and it's productive and it's changing some of the economic models, but it's just one little sliver and it's making a bet on hardware that we know we are not going to be able to produce in the not too distant future. So it's probably just a moment. It's certainly a bubble.

[Tom Bilyeu]

Well, Peter, this has been extraordinary. You have touched on so many of my base assumptions and given me so many new things to integrate, think through.

[Peter Zeihan]

I'm so sorry.

[Tom Bilyeu]

No, man, this has been incredible. Really. I mean this. Thank you so much for taking the time. Where can people engage with you?

[Peter Zeihan]

Zion.com Z-E-I-H-A-.com is where you can sign up for the free newsletter. There's also a paid version that gets you a lot more bells and and whistles. The most recent book is the End of the World is Just the Beginning. And I've recently been contracted to write my first fiction and that's going to be at least three books and those come out about a year from now because publishing takes forever.

[Tom Bilyeu]

That's exciting. So you've already finished the first one? Have you started the second and third.

[Peter Zeihan]

I am 90% of the way through book two at this point.

[Tom Bilyeu]

Damn. All right, man. Well, that's exciting.

[Peter Zeihan]

Yeah. It basically takes all of these demographic and geographic and structural changes that we've talked about today. De globalization, depopulation, aging and set sets a fictional story against those factors and how the world remakes from a personal point of view.

[Tom Bilyeu]

I can't wait to read it. That is very exciting.

[Peter Zeihan]

It was a lot of fun.

[Tom Bilyeu]

All right, everybody there, make sure you check it out, guys, if you haven't already, be sure to subscribe. And until next time, my friends, be legendary. Take care.

[Peter Zeihan]

Peace.