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  • Notes from Schrödinger’s Cold War

    (Photo by XNY/Star Max/GC Images)

    Let’s begin 2026 with a bit of geopolitics, and a note from Dan Wang’s annual year-end letter, musing about the preponderance of Sputnik moments that lead nowhere:

    One of the startling geopolitical moves of the year was how quickly Donald Trump withdrew his ~150 percent tariffs on China. Trump folded not out of beneficence, but because Xi Jinping denied rare earth magnets to most of the world, threatening many types of manufacturing operations. And yet I’m struck by Beijing’s relative restraint. Chinese producers are close to being monopolists not only in rare earths, but also electronics products, batteries, and many types of active pharmaceutical ingredients. In case China denies, say, cardiovascular drugs to the elderly, how long could a state hold out?

    One might have expected the US to have roused itself after this bout of the trade war. But there have been too many declarations of Sputnik Moments without commensurate action. Barack Obama declared a Sputnik with China’s high-speed rail; Mark Warner repeated with Huawei’s 5G; Marc Andreessen called it with DeepSeek. The more that people use the term, the less likely that society spurs itself into taking it seriously.

    That passage resonated for a few reasons. First, it’s just a good observation: there have been lots of purported Sputnik moments in recent years! Second, the collective meltdown in the wake of DeepSeek’s R1 release last year is still amazing to look back on (approaching the one year anniversary!), and as someone who follows China news every week, I can attest that that sort of fevered, existential dread is not rare (Huawei’s Mate 60 Pro and its 7 nm chip inspired a similar wave of alarm across Washington). And finally, paranoid AI and chip hyperbole nowithstanding, Wang asks a serious question that I come back to frequently: if these two countries are trending toward a full decoupling and a prolonged conflict, then why isn’t the US acting like it?

    Aside from rhetorical commitments to restoring domestic industrial capacity and a variety of China Select Committee investigations that tend to go ignored, there’s near-weekly evidence that Congress and the current administration are not entirely serious about leading a whole of nation effort to eliminate regulatory bottlenecks to power abundance, bring pharmaceutical production onshore, mine and refine rare earths, and reduce the leverage that China has over the U.S. economy in about a dozen different areas. Absent solutions on any of those fronts, some of which will take years, Trump couldn’t even ban TikTok. Then, just before Christmas, the U.S. greenlit the sale of high-end Nvidia chips that could help Chinese companies narrow the gap with U.S. competitors in AI. If successfully navigating a prolonged competition with China requires not only acknowledging said competition but actually making the sacrifices necessary to win it, one could be forgiven for reading the news over the past 10 years and concluding that America simply doesn’t have the mettle to prioritize long term national interests over short term private interests (or political incentives).

    Wang, who earlier in 2025 penned the New York Times bestseller Breakneck, about China’s quest to engineer the technological future, published his year-end letter on New Year’s Day. Then, 36 hours after reading his warnings about American complacency, I opened WhatsApp to find a flurry of messages and tweets about a Delta Force operation to capture and exfiltrate Nicolas Maduro from Caracas, fly him to Manhattan to face prosecution on drug charges, and replace him with a government that’s beholden to the United States.

    Now when I re-read Wang asking whether America can rouse itself to respond to competitive threats from its greatest adversaries, I can’t help but wonder whether the world just watched the U.S. provide an answer.

    What the U.S. Wants in Venezuela

    Attempting to parse the logic and implications of this operation is not easy, and possibly ill-advised. The facts on the ground will continue to evolve, as will our understanding of last week’s operation. With that caveat noted, and having just recorded a Sharp China episode that was largely focused on China’s reaction to these developments, I’ll work from what’s known today and share why I’m encouraged by what the U.S. is attempting here.

    First, there’s the threshold matter of who’s driving these policies and what that means for how they’re perceived. Let’s stipulate the Trump administration says and does a number of things that are unbecoming of the Presidency. I won’t list my personal grievances and specific examples of the lack of humanity, judgment and/or tact of the current administration, but suffice to say I understand why anyone would be exhausted and deeply uncomfortable with this presidency. On the other hand, where Trump critics tend to err is in the assumption that because he is often careless and objectionable, everything he does is careless and objectionable. If you start from the premise that Trump is simply a boorish moron who’s unfit to hold power in any context, there’s a risk that confirmation bias will distort the analysis of whether any of his policies are reasonable or effective. This leads to buying into resistance fan fiction like “Trump didn’t support an incredibly risky, full scale regime change because of bitterness over the Nobel Peace Prize,” and, a more relevant risk for his political opponents, it leads to opposing a good number of broadly popular policies and initiatives.

    Going the the other direction here, and treating Trump like a historical figure worth thinking about with a bit more intellectual rigor, one of the most perceptive (and concise!) reads on Trump-era policy came early last year from a Bank of Japan Deputy Governor named Himino Ryozo. Remarking on tariffs and how Japan should view the U.S. under Trump, Himino began his comments by saying:

    If I could offer some personal and tentative reflections, I would argue that there are three characteristics that define the current administration’s way of thinking.

    First, the administration adopts a holistic approach and treats political, economic, and cultural matters, as well as domestic and international affairs, as integral parts of a single, inseparable policy agenda.

    Second, while it is highly flexible in its tactical decisions, switching its approaches as situations evolve and choosing when to press ahead, pause, or make temporary retreats, the administration remains persistent in its strategic choices about what it ultimately aims to attain.

    Third, it is unfettered from conventional wisdom and orthodoxy, focuses on facts that define the locus and sources of power, and explores opportunities that have thus far not been exploited.

    The analysis above applies pretty cleanly to the news of this week. I don’t have a security clearance, but it seems likely that U.S. national interests driving engagement in Venezuela are related to countering transnational narcotics gangs, controlling the flow of oil, securing access to critical minerals, power projection, and national security. The U.S. was negotiating a peaceful Maduro exit to Turkey in late December; when that offer was rejected, there was a pivot.

    Maduro was a repressive, corrupt dictator who oversaw human rights violations and suffering on a mass scale. My own lesson in that respect came when I saw the Venezuela’s basketball team at the Rio Olympics in 2016 and met a Venezuelan fan who told me through a translator that he was filling his suitcase with medicine to bring back to his his mother and grandmother, all while the team played in Rio amid a widespread hunger crisis back home (and spoke very carefully about it). There have been two rigged elections since then, and removing Maduro now is hopefully a step in the right direction for the Venezuelan people.

    Still, there are corrupt, inhumane leaders all over the world. As to the American interests that justified capturing this one, with one of the most audacious U.S. military operations of my lifetime, Marco Rubio appeared on “Meet The Press” this week and said the following:

    “What we’re not going to allow is for the oil industry in Venezuela to be controlled by adversaries of the United States. You have to understand, why does China need their oil? Why does Russia need their oil? Why does Iran need their oil? They’re not even in this continent. This is the Western Hemisphere. This is where we live, and we’re not going to allow the Western Hemisphere to be a base of operation for adversaries, competitors and rivals of the United States.”

    It would be easy to focus on the first half of the answer—oil! Iraq part two!—and miss the far more important note on Venezuela as a base of operation for adversaries, competitors, and rivals of the United States. By many accounts, that’s precisely what Venezuela had become.

    For example, this article from Renegade Resources was compelling, outlining the extensive ties between Venezuela and Russia, which sells arms to Venezuelans and trains them (“Over 120 Russian troops operate in Venezuela under Lieutenant General Oleg Makarevich, leading what Ukrainian intelligence identifies as the “Equator Task Force.’”); Iran, which sold even more arms to Venezuela and has an operational presence in the country (“Documented Iranian weapons transfers to Venezuela since 2020 include Mohajer-6 unmanned aerial vehicles with 2,000 kilometer operational range, sufficient to reach any target in Florida. Venezuela has publicly displayed these systems in military parades from 2021 through 2023.”); and then China, which has flooded the country with investment and cornered the market on critical minerals extraction (“Western nations seeking to diversify away from Chinese processing looked to Venezuela, only to discover Chinese buyers already controlled extraction operations. This is strategic encirclement where China dominates both global processing infrastructure and alternative source extraction”). There was also a note this week from former Biden NSC official Rush Doshi, who wrote that “The PRC has long pursued military sites in Latin America,” and that “prominent PRC figures confirmed to me directly [one desired site] was Venezuela.”

    This overview of Unmanned and Autonomous Underwater Vehicles highlights another potentially urgent security risk, noting that Venezuela’s coastline “sits close enough to the Panama Canal, Gulf shipping lanes, and cable approaches that UUVs can operate without long transits draining their batteries.” Undersea drones were recently deployed to great effect in the Ukraine war and are incredibly difficult to defend against. The hypothetical risk of deploying them from Venezuela to disrupt U.S. internet cables and shipping lanes illustrates the more concrete problem with allowing hostile foreign adversaries to deeply embed military assets in a country within the Western Hemisphere. If the U.S. intends to defend Taiwan, or Ukraine, or fight battles anywhere else in the world, it’s a potentially history-altering liability if China, Russia and/or Iran have the capability to paralyze the U.S. economy from South America (and exhaust U.S. resources addressing the problem).

    Finally, while the ultimate value of Venezuelan oil to the United States is debatable, the value of that oil to China is more interesting. To wit, restricting oil exports to Cuba could spell disaster for the communist regime within months, which would be bad news for Russia and China, both of whom maintain extensive signals intelligence operations in the country. Additionally, this highly technical post about oil composition and global refining capacity argues that if U.S.-aligned producers in Venezulea stop shipping oil to China, over the long term, it could force China into a single point of dependence on Iran for certain critical oil imports (Canada is potentially a player here too, while reliance on the Iranian regime is increasingly looking like a pretty big wild card). On the other hand, if US-aligned producers in Venezuela do ship to China, but retain the power to pause those shipments, that creates leverage over the Chinese industrial complex that mimics rare earth export controls and creates “a very real wartime advantage against China.”

    That post concludes by observing of the strategic advantage, “It’s likely the US does not recognize this fully. They just wanted China OUT.” Which brings us to a headline from Tuesday night—Trump demands Venezuela kick out China and Russia, partner only with US on oil: EXCLUSIVE.

    What the US does and doesn’t recognize about the scale of its opportunity is an open question, and there’s room to debate how much strategic leverage America will actually gain. Regardless, it certainly looks like the U.S. is in a better strategic position today than it was a week ago. The same cannot be said for Russia, Iran, or the CCP, which had an “all-weather strategic partnership” with the Maduro regime, had Chinese delegates meeting with the former president hours before he was captured, and is now left hoping that the U.S. continues to sell them oil.

    The Cold War That Was Never Announced

    Many of my millennial peers processed the news last weekend and immediately thought about the Iraq War. I get that. Those were formative political years for an entire generation that was then conditioned to be skeptical of military engagement specifically and Republicans generally. None of us have lived in a world where there’s active tension with rival superpower. Moreover, to anyone who’s not been paying close attention to the threats facing the U.S. in any wartime scenario, and the extent to which those threats have expanded and evolved over the past 10 years, a Delta Force helicopter invasion to capture a world leader on foreign soil, in violation of International Law, sounds like something that would be too stupid even for Dick Cheney, but might be pushed by Donald Rumsfeld.

    Also, let’s go back to Sputnik. The reason there’s never been a Sputnik moment that resonates with the mainstream is because most people don’t even know the U.S. is in the middle of another cold war. David Wallace-Wells had a good column about this dynamic for the New York Times last year, noting that “part of how Americans made sense of their rivalry with the Soviet Union was through popular culture,” while “this time, there has been essentially none of that — no real effort in Hollywood to make use of high-stakes global conflict even as a narrative crutch.” But of course Hollywood’s not doing that; Zootopia 2 just made a billion dollars thanks to the Chinese market. And in all seriousness, given the economic interdependence of the US and China, there are lots of incentives to not declare a cold war, mobilizing the entire United States public behind efforts that will take years, while tanking the retirement accounts of 100 million Americans in the meantime.

    All this makes for a bewildering landscape in which the U.S. is on one hand taking certain steps that seem reckless, overtly aggressively, and unprecedented in the modern world, and on the other hand conducting business mostly as usual. The Administration itself does not make it any easier; unlike the Bush administration pushing Yellow Cake stories in 2002, none of the asymmetric threats described above have been cited publicly, while Trump talks often about his “great relationship with Xi Jinping.” After meeting Xi in November he referred to the US and China as the “G2” and wrote, “This meeting will lead to everlasting peace and success. God bless both China and the USA!” He’s set to visit Beijing in March, and U.S. countermeasures on China are paused indefinitely in service of a trade war truce to keep rare earths flowing for at least the next 10 months.

    It’s certainly possible that Trump’s critics are right and he is a credulous fool, easily flattered, destined to start pointless wars, destroy relationships with allies, and forge a grand bargain that hands China control of Taiwan. Chinese scholars certainly hope so. My guess, though, is that those assessments will ultimately look facile. Trump’s words have successfully mollified the Chinese and kept rare earths flowing to U.S. industry, but last weekend’s actions reflect an American security apparatus that understands the scale of its modern threats and the urgency of addressing them.

    Here’s to betting that there will be more moves that bend the norms of the postwar liberal order but nevertheless advance American interests in ways that will benefit successive administrations from either party. As for Venezuela, it’s still early. It will be several years before we know whether any of this was truly successful. In the meantime what we can say for certain is that last weekend’s operation an attempt at fortifying regional security that may weaken some of America’s greatest adversaries. If not quite a race to the moon, it was the latest reminder that we’re all living in a different world these days.

    Sharp Text is extension of the Stratechery Plus podcasts Sharp Tech, Greatest of All Talk, and Sharp China. We’ll publish once a week, on Fridays. To subscribe and receive weekly posts via email, click here.

  • Five Questions About Victor Wembanyama

    (Photo by Ronald Cortes/Getty Images)

    The holidays are here, and today I’d like to keep it light and talk hoops. Specifically, the most interesting story in basketball this year: Victor Wembanyama and the San Antonio Spurs. Here are some notes, and five questions on my mind, as I watch this story unfold in 2025 and 2026.

    1. How Great Is He Right Now?

    Last weekend, ESPN asked Wembanyama who is the best player in the NBA, and he said: “Jokic is the best offensive player… I don’t think he’s the best player. I think it’s between Giannis and Shai. When I come back on the court, I think it’ll be me.” I rolled my eyes. He delivered that line having played only 12 of the 24 Spurs games at that point, and after missing half of last season, as well. He’s never made the playoffs. Players with that kind of track record can’t call themselves the best player in the NBA.

    And yet… Mere hours after I saw that clip, Wemby returned from injury, sat the entire first quarter of San Antonio’s Cup semifinal against the 24-1 Thunder, then finally entered the game with San Antonio down 11 at the beginning of the second quarter. Everyone knows what happened next, but I’ll repeat it here because I’m still a little bit amazed.

    The first quarter showcased everything the league has been this year—OKC on its way to another 20-point win—and then the script was flipped, showing us what the NBA story might be in the near future. Wemby met one of the most dominant regular season teams of all time and made them look mortal. Offensively, he was good, settling down against OKC pressure, getting to the line 12 times, and generating all kinds of open looks for teammates (the rest of the Spurs were great as well). Defensively, he was laughably dominant, almost single-handedly short circuiting anything the Thunder tried to do inside the arc. Altogether it was a reminder that Wembanyama side-eyeing Jokic’s dominance (“best offensive player”) may be a corny look for a player who’s never won anything meaningful, but strictly as a technical matter, even if “best” is subjective, “making a bigger individual impact than any player in the league” is not far off.

    Then came Tuesday and the NBA Cup Final against the Knicks, where it was Mitchell Robinson making Wembanyama look mortal. Wemby, who played that night having lost his grandmother earlier in the day, never found his rhythm offensively and had no answers as New York took control in the fourth quarter. The Knicks, and particularly the 7’1 journeyman Robinson, punished San Antonio on the glass down the stretch. Offensively, Wemby missed all four of his shots in the fourth quarter (including three missed threes). He finished his 25 minutes with the worst plus-minus on either team (-18), spawning fair questions from the viewing public:

    And look, this is part of the fun! There’s no definitive answer to “how great is he right now?”; instead, there are fits and starts as he navigates the journey from preposterously talented prodigy to literal MVP candidate. Some nights all the pieces click and your mind goes to crazy places, others he’s getting justifiably clowned on Twitter. He’s somewhere between the 4th and 11th-best player in the league. The Spurs have been as successful without him this season as they have been with him. On defense, I’m pretty sure he’s the most dominant player I’ve ever seen. He covers so much ground with his length and his feet that he shrinks the court for opposing teams, taking away shots in the midrange and at the rim. He rarely fouls, and during the NBA Cup final on Tuesday, Nate Duncan noted “the Knicks are 6-17 in the paint with Victor on the floor. 12-15 when he’s off.” It’s like that every game!

    Offense is more of an adventure. He’s made real progress this season and kicked his addiction to threes—last year he took 8.8 threes-per-game and 4.1 free throws, and this year those numbers are inverted (4.5 threes, 7.7 free throws). But he still struggles with physicality. His shot selection is inconsistent. He should be a play-finisher who terrorizes teams in the pick-and-roll and lives at the rim, and while he’s done more of that this year, just as often he’ll try to initiate offense on his own, stop the ball, and end up settling for contested jumpers. He’s playing much smarter offense than last year, but it’s still not clear he knows where he wants to go on that end, and how he wants to score.

    So yes, “best player in the league” is still a ways off, mainly because earning that label means doing it every night — and, more importantly, in the playoffs. That’s where Jokic and Shai have been. But while we wait for Wemby to get there, watching him try to put the pieces together is the best show the league has. He’s as dominant on defense as Jokic or Steph are on offense. On the other end, the sample size of Wemby playing meaningful offense for a winning team is small enough to make every new game interesting. How much better can he get? How will he fit with capable teammates? How will he respond in the clutch? I look forward peeling that onion for the next five months.

    2. Can He Stay Healthy?

    One more thing on the “best player” quote. Consider the guys who have actually been in the mix to wear that crown over the last 30 years. Jordan, Duncan, Shaq, Kobe, LeBron, Steph—all of them were borderline bionic and enjoyed near-perfect health when they had a credible claim to being the best player in the NBA. The same is true for SGA and Jokic now, even as the rest of the league goes down in a heap of adductor injuries and calf strains.

    Wemby is listed at 7’4, may be closer to 7’6, and the track record of players that tall staying healthy is not great. Wemby, himself, suffered a stress fracture in his hip before he came to the NBA, was mostly healthy his rookie year, missed half of last season with a scary blood clot injury, and has missed half of this season (so far) with a calf strain. I didn’t want to foreground this question and be a buzzkill, but it’s the single most important question for the future of Wembanyama, and to a lesser extent the NBA. My fear here is that humans weren’t meant to be this tall and move the way Wemby wants to, and therefore weird, seemingly inexplicable injuries will recur, and all the talk of who the Spurs should trade for, how he should play, a potential rivalry with OKC—topics I’ve loved discussing all year—will come to look like a lot of wasted energy.

    The worst case scenario for basketball fans is one in which Wemby does grow into the most dominant player alive, he’s ranked atop every list, and we only get to see him play games about 60 percent of the time. The best theoretical player alive. And that scenario, if not necessarily likely, is a possibility that can’t be totally discounted until he plays a full season and full playoff run without any major hiccups. So here’s to knocking on wood.

    3. Is Peak Wemby a Hero or a Villain?

    It may seem crass to consider vilifying a 21 year-old kid who’s impossibly gifted, hard-working by all accounts, and unusually thoughtful and articulate (in a second language). But hear me out. He opened last year by saying of certain NBA stars, “I’m just not sure they deserve it. Like they don’t seem like they put as much work in as I thought.” Earlier this week, he explained that he plays more “correct” basketball than everyone else, in his opinion:

    In modern basketball, we see a lot of brands of basketball that don’t offer much variety in dangers they propose to the opponents. Lots of isolation ball and, sometimes, kind of forced basketball. We try to propose a brand of basketball that can be described as more old school sometimes; the Spurs way as well. So it’s tactically more correct basketball, in my opinion.

    Of the Knicks, he said, “They don’t play a brand of basketball as sophisticated as the Miami Heat or the Thunder.” Rather than give the people what they want (more shots at OKC’s foul-baiting), he appears to have appointed himself basketball and work ethic ombudsman. Great.

    No one is saying Wemby is a bad person, but is he annoying? He’s definitely not cool. He’s lecturing people, philosophizing, performatively reading books in the locker room (and getting mocked by Jokic), and generally coming off like someone who’s very invested in seeming smart. Where Anthony Edwards exudes charm, Wemby exudes smarm. Or, put differently, Wemby is quite clearly French (derogatory).

    There have been lots of questions about whether America will eventually embrace a 7’4 international star as the best player in the NBA, and how that might impact of the popularity of the league. What I have been wondering about for the past two years—Wemby interviews have been a tough hang for a while now—is whether Peak Wemby would better for the NBA’s ratings if most of America agreed that he’s annoying and began rooting for him to fail. This may sound like a counterintuitive marketing strategy, but the league was very popular when LeBron went to Miami in 2010! It’s worth considering: as the Spurs become more of a mainstay in the years to come, would the league be better off if Wemby were delivering press conferences exclusively in French (because it’s a superior language),1 and more explicitly hating on the work ethic and basketball IQ of American players? And, of course, telling his critics that win or lose, he’s going to the Côte d’Azur, and they all have to go back to their sad, fast food-filled lives.

    The counter here is two-fold. First, Wemby at his absolute best is so electric that he’s closer to Steph Curry in 2016 than LeBron James in 2010. He’s hitting shots from everywhere, smothering offenses by himself on the other end, and gliding around looking like a prototype that’s never been seen before. The coolest experience in sports is when a player or a big game is preceded by crazy amounts of hype and anticipation, and then the player or game actually exceeds the hype in the moment. When Wemby’s offense clicks, that’s what happens. It’s very difficult to root against, and more aesthetically thrilling than, say, Shaq in 2001, or even LeBron at his peak.

    Second, I’m not sure the NBA media ecosystem has the capacity to lean into a villain framing in the modern era. It’s been 15 years since the Decision and the resulting backlash, and lots of NBA media is still over-correcting for that environment, afraid to criticize players, and lecturing fans who do. That’s before you get to the inevitable neuroses about criticizing a foreign player, even though, to be clear, this is all in good fun and not that serious (as if the French don’t roll their eyes at Americans).

    We’ll see where we end up. For now, Wemby is magnetic as a relative unknown. Once his game becomes more defined, and assuming his team becomes more dominant and inescapable, I’m very curious to see how the public responds, how Wemby himself changes, and what it all means for the league.

    4. Should the Spurs Have Drafted Kon Knueppel?

    Over the summer I argued on Greatest of All Talk that the Spurs should have drafted Kon Knuppel over Dylan Harper with the number two pick in June’s Draft. I thought Knueppel had a higher ceiling than people realized, Harper’s ceiling wasn’t meaningfully different, and Knueppel was a much better fit with the roster in San Antonio, and Wemby, in particular. Three months into the NBA season, that take is… still very much alive!

    Knueppel went fourth in the draft, and he’s been outstanding in Charlotte, effective on and off the ball. He’s the front runner for rookie of the year. Harper, to be clear, has been nearly as impressive in San Antonio. He snakes his way to the rim with ease. He’s finishing in the paint like a player who’s been in the league for 10 years. He’s good on defense. He clearly has All-Star upside. My question with him on the Spurs—how effective can he be if he’s sharing on-ball responsibilities alongside De’Aaron Fox and Stephon Castle?—has been answered, and the early returns are encouraging. He looks comfortable on and off the ball, and he’s putting pressure on the defense in all kinds of ways. No matter what happens from here, this wasn’t an Oden-Durant situation; Harper is already good, and could be great.

    I do still wonder about the roster construction. The Spurs were winning without Wemby (during his calf strain hiatus) playing a frenetic offense built around Fox, and adding Harper and Castle to that mix is a perfect fit for that kind of relentless, attacking style. Having multiple ball-handlers who can go downhill and get to the rim is a good thing, as evidenced by both teams in last year’s Finals. If the goal is optimizing Wemby’s offense, though, it would be nice to run pick-and-rolls where defenses actually have to fear the guard taking pull-up threes, as opposed to hedging onto Wemby and making his life more difficult. Or, when Wemby kicks out of double teams for the next five years, it would be nice to have Knueppel there — shooting 40.5% from 3 on 8.5 attempts per game — instead of Harper, who’s currently shooting 26% from three on 2.5 attempts per game.

    It’s entirely possible that Knueppel plateaus in Charlotte over the next year or two, while Harper improves as a shooter and becomes an All-NBA sidekick throughout Wemby’s prime. Obligatory qualifiers aside, though, Knueppel has been good enough to make this a killer “what if?” that will be fun to track for the next several years, particularly if San Antonio’s halfcourt offense looks as clunky in close games as it did in the fourth quarter against the Knicks Tuesday night.

    5. What’s the Ceiling in San Antonio This Year?

    I love watching Harper and Castle slither around (Harper) and barrel through (Castle) NBA defenses. Those two alone have made me a Spurs fan this year, while Fox looks like an All-Star again and has raised the floor for everyone. Watching the Spurs on the right night will give you shades of the young OKC teams with Durant, Harden, Ibaka, and Westbrook (Luke Kornet is bizarro Perk here). And like that OKC team in 2010, my bet is that for all the fun over the past few weeks, this is a team that ends the year with a valiant first round loss. San Antonio is too small and too thin on the wings, and while Harrison Barnes is punching above his weight in Year 13, the returns there will likely diminish as the months pass. When it matters, Fox can only do so much, and Wemby is not ready for crunch time possessions on offense.

    On the other hand, Wemby in year three is already so dominant on defense that he will level the playing field in any playoff series the Spurs enter. Also, he’s played a total of 14 games this season and only played 25 minutes in San Antonio’s loss Tuesday night. What does his offense look like with a full four months of regular season games next to Fox, Castle, and Harper? And if he gets 20-30% more comfortable by the end of the year, how might that change the equation? The most purely enjoyable phase of sports fandom is not actually the prime of a great player or a special nucleus, but that period just before their dominance is established, when expectations are minimal, and the possibilities are endless.

    Spurs fans should enjoy that ride for the next few months. The rest of the basketball world will be right there with them.

    What I’m Reading This Week

    This is my first NBA article in more than a month, and I’d be remiss if I didn’t note that the proposal from my last piece, a fix for the NBA Cup and the parity era, would have ended with the Knicks getting the number one pick, the Spurs getting number five, OKC getting 10, and Orlando getting 15. This would have been a phenomenal outcome for the league, adding one more young star to Wemby’s team, putting the number one pick in New York City, and making this week’s Cup Final the biggest story in sports. Maybe next year!

    As for the writing everywhere else… Vacation is approaching for most of us, so I’ve included a few more recommendations than usual this week.

    On that note, we’re done for the next few weeks. Thanks for reading, and see you in 2026.

    Sharp Text is extension of the Stratechery Plus podcasts Sharp Tech, Greatest of All Talk, and Sharp China. We’ll publish once a week, on Fridays. To subscribe and receive weekly posts via email, click here.

    1. Credit to GOAT listener Bryan M. for this wonderfully obnoxious suggestion. ↩︎

  • Netflix and the Flattening of Everything

    Mario Tama/Getty Images

    A few months ago, about 30 minutes after Ben Thompson and I finished recording a Sharp Tech segment about Spotify making video episodes of The Rewatchables podcast exclusive to YouTube, I realized I’d missed a fundamental irony looming over the news: Netflix, new home of The Rewatchables, is the same company that effectively killed the rewatchable movie.

    That’s not a condemnation, but simply a fact. The emergence of Netflix and its business model accelerated the demise of Blockbuster and the DVD/VHS market, which fundamentally altered the risk tolerance of the movie business. Here, I’ll lean on an email from a Sharp Tech listener named Steven that came in earlier this year. Please forgive the long excerpt, but he nails it:

    In the 80s and 90s, movies had significantly less dependency on their box office take because they would usually make a larger component of their overall revenue in the home video market as well as being shown on broadcast/cable TV. Blockbuster’s default revenue share of a movie rental was in the 40-50% range depending on the studio, which meant the post-box office revenue for a “single watch” was considerably higher than what studios see today from the streaming services. The revenue from a “true fan” was multiples higher.

    The death of that market has produced two parallel problems that are killing creativity within the industry. First, the ARPU has dropped considerably, and while the internet has enabled a much broader global market, that isn’t an asset unless you’re telling stories that appeal to a global market – as an example, I’m not sure what the appeal of Hoosiers is outside the US. That cuts off a considerable number of stories from being made right there.

    Second, you either make or break a movie in the box office exclusively today, and misses are catastrophic. As a result, you have to spend enormous money on marketing and then you throw in your famous recognizable actor/actress which command high salaries, and if you’re going to spend that much on marketing and Ryan Gosling, you might as well spend more on the rest of the movie. As a result, the cost of making movies has skyrocketed and risk tolerance is at an all time low.

    In the past, a movie could flop in the box office, find an audience in rental, get a boost from TV showings on niche cable networks aligned to its core audience, get a boost from the Oscars, etc and make its money back over years with multiple swings of the bat at lower cost marketing campaigns. This was essential because – how do you market a movie like Shawshank Redemption perfectly when you have exactly one shot at it? We’re now in a world where targeted marketing should be able to find exactly the right million viewers for a movie, but the revenue mechanisms we have in place don’t function for midsized audiences. As a result, we get YouTube content and big budget films.

    Matt Damon has made the same argument point in a 76-second interview clip that goes viral on X every few months. The specific type of movies that suffered in this boom-or-bust ecosystem are the bread and butter of The Rewatchables: mid-budget movies that are kinda idiosyncratic, with great actors and unique stories that will pull you back in if you happen across them on cable. For example, I loved recent Rewatchables episodes on 1992’s Sneakers (budget $35 million), 1996’s Tin Cup ($45 million), 1995’s Quiz Show ($31 million) and 2005’s Two for the Money ($35 million, and an inspired choice from the Rewatchables editorial team). I also had a great time re-watching 1995’s Crimson Tide on Sunday ($53 million), and that’s another movie that’s never made today (and no one ever settles the question of whether Lipizzaner stallions are from Spain or Portugal).

    Not all of those movies are classics, but they’re fun and weird and interesting in a way that today’s movies usually aren’t. And as for true classics, you can go right down the list with some of the most iconic movies in history. Would Hoosiers be made today? A Few Good Men? The Firm? Jerry Macguire? Smart, ambitious, character-driven content for adults doesn’t really have a place at modern movie theaters anymore (but we do get eight Mission: Impossible movies).

    This isn’t to say that sort of content stopped being made. Many of the mid-budget projects made for adults are now made as TV shows. Some of them are great, and many of them are just fine. I watch most of them. Re-watching those shows, though, and reliving the character arcs, twists and emotional payoffs of stories I remember fondly, requires committing 10 to 20 hours of my time. I’ll make that commitment for certain exceptional shows (The Wire, The Americans, Veep, Eastbound and Down, Industry, Le Bureau), but I can’t imagine finding the time to revisit a much bigger universe of pretty good or even very good shows that I genuinely enjoyed and will probably never see again (Game of Thrones, Mr. Robot, The Honourable Woman, Narcos, Billions, The Night Manager, Yellowstone, Orphan Black, Killing Eve, House of Cards, and dozens of others I’m forgetting).

    The problem with this landscape for audiences is that the current environment renders even the best content disposable and less meaningful than it used to be. The industry that people love, or at least that I have always loved, was centered on shared experiences in theaters, and films that could be revisited for years to come, reviving all the memories, unintentional comedy, and unanswerable questions that have made The Rewatchables one of the most successful podcasts on the planet. That doesn’t really exist anymore. Even the fun genre movies that do get made (2023’s Air would be a decent Rewatchables candidate) are now competing in tiles, instead of re-running on channels, and are quickly overwhelmed by a river of new content that will itself be forgotten as soon as it’s watched.

    For streaming services, meanwhile: If educated adults and families who pay $17.99/month for services like Netflix are enjoying new scripted content, but don’t have time to revisit any of it, those platforms need to make, license or acquire a lot more content to keep people watching. Which brings us to this week’s merger news.

    Why Netflix Wants Warner Brothers

    Netflix’s proposed acquisition of Warner Brothers Discovery is already fraught with peril, with inevitable regulatory challenges looming, and continued bids from Paramount that may force Netflix to continue a bidding war for months, an adventure that may not appeal to Netflix shareholders. Let’s assume, though, that the deal were to go through as announced last Friday: Netflix buys Warner Brothers for $72 billion and assumes $11.1 billion in debt while taking on $50 billion in new debt, all to to finance the purchase of a studio that has been sold four times in the past 25 years, in a succession of deals that ended in varying degrees of disaster. Given the history of media mergers at this scale, why would Netflix risk regulatory scrutiny and a whole new round of debt skepticism to go this direction anyway?

    In short, acquiring Warner Brothers is both an offensive move that would dramatically enhance Netflix’s offering to customers, and a defensive move that would eliminate any new competition in the paid streaming space, possibly forever. To the former point, Warner Bros. provides exactly the sort of library that Netflix needs in order to keep audiences engaged, and no, it’s not a coincidence that almost all of this content dates to an era before Netflix upended the entertainment ecosystem. One baseline irony of the deal is that Netflix has been so successful at disrupting audience consumption habits that its own original programming efforts have almost universally failed to develop durable, franchise appeal in the modern era; so much so that the company is now paying a $72 billion premium to acquire content that was mostly made 25 years ago.

    Regardless, Warner Bros. movies and television shows provide some of the most attractive IP available anywhere, eliminating Netflix’s need to license shows like Friends, ER, or The Big Bang Theory, while also opening a world of original franchises to push to global audiences and potentially leverage for new content (e.g., Batman, Superman, Game of Thrones, Harry Potter, The Matrix). HBO could be offered as a premium tier of Netflix, and its staggering collection of scripted TV hits could be marketed to a bigger audience than HBO Max ever had. Netflix already has 100 million more subscribers than its next-closest competitor, with a much lower churn rate than anyone in the space. This deal would transform the company from last year’s Thunder (68-14, champions) to this year’s Thunder (24-1, won by 49 points Wednesday night).

    Part of that story, of course, would be killing off one of its chief competitors in HBO Max (currently the fourth-largest streaming service), while preventing Paramount or Comcast from leveraging HBO and Warner Brothers content to mount a real challenge in the future. This is the defensive appeal.

    A deep reservoir of Warner Brothers scripted content affords Netflix not only the ability to tap a much richer vein of IP on its own platform, but also to potentially withhold that content from competing platforms, making it that much harder for any other service to make inroads into the future streaming market. As Ben Thompson observed of this possibility on Stratechery this week:

    [I]t seems likely that Netflix will, over time, make Warner Bros. content, particularly its vast libraries, exclusive to Netflix, instead of selling it to other distributors. This will be economically destructive in the short term, but it very well may be outweighed by the aforementioned increase in value that Netflix can drive to established IP, giving Netflix more pricing power over time (which will increase regulatory scrutiny)

    Pricing power is the endgame for both the offensive and defensive logic of this merger. A Netflix subscription was $7.99/month a decade ago, and it’s $17.99/month today. Better content and fewer credible alternatives for customers will make it much easier for Netflix to ratchet that number up every eighteen months for the foreseeable future.

    Now, to the extent Hollywood is currently in the throes of an industry-wide panic over the possibility of a Netflix-Warner Bros. merger (complete with a great Variety cover this week), that, too, is a pricing power story, but the concern is not limited to customers.

    Will Netflix Get Warner Brothers?

    Senator Mike Lee chairs the Senate subcomittee on antitrust, and he said this week that the proposed deal raises “about seven different red flags.” For one, as the Entertainment Strategy Guy observed earlier this week, the merger would flunk any consumer welfare analysis undertaken by a court, because it’s likely to reduce the supply of scripted Hollywood content (bad for consumers), and lead to higher prices (ditto). The latter point was addressed in the previous section, while the former is simply a matter of common business sense. Netflix is buying a studio that makes TV and movies to pair with its original programming operations. If the deal closes, one platform can only serve so much content (Netflix has been investing in fewer original programs every year since 2022), and audiences will almost certainly get fewer total TV shows and movies than they did when two studios were making content for two different platforms. That will also mean fewer jobs in Hollywood, and reduced bargaining power for the writers, directors, actors and crew members still working.

    The law at issue in a Netflix case is probably going to be Section 7 of the Clayton Act, which is a more liberal standard than the Sherman Antitrust Act and bars “acquisitions where the effect may be substantially to lessen competition, or to tend to create a monopoly.” Assuming the deal is challenged, the legal question will turn on how any court defines the market where competition is allegedly at risk. And to be sure, Netflix has a colorable argument that any market analysis should not be limited to premium streaming services (where Netflix dominates), but should include YouTube and liner television networks. As co-CEO Ted Sarandos argued to President Trump this fall, Netflix is “the fifth-or sixth-biggest distributor on TV,” compared to YouTube and a variety of cable conglomerates. Buying Warner Brothers “would make the company roughly the size of YouTube,” in Sarandos’ rendering, while analysts point out that Disney “represents more TV time spent (10%) than Netflix does today (8%), and is still larger even with HBO added (8% + 1.3%).”

    As Netflix’s other CEO, Greg Peters, explained to investors this week:

    We just want to really bring the facts to this conversation because if you look at Nielsen, this is Nielsen number of view hours on TV in the U.S. … We’re sixth in the current ranking right now. We’re behind YouTube. We’re behind Disney. We’re behind NBCUniversal. We’re behind Fox. We’re behind Paramount. And then if you say, ‘Okay, well, you’re going to go buy HBO and HBO Max, put that viewing on the list,’ this is what that would look like. We go from 8% of view hours today in the United States to 9%. We’re still behind YouTube at 13%. And potentially worth noting that we would be behind what would be if Paramount combined with WBD, them at 14%. We think there’s a really strong, fundamentals-based case for why regulators should approve this deal.

    The narrative sleight of hand on display there is Netflix comparing itself to completely different businesses, with different cost structures and different distribution networks; namely, cable companies that broadcast on linear television (like Disney or NBC) or on free apps like YouTube. Netflix clearly doesn’t have interest in competing for viewing hours in the cable or broadcast space, otherwise it would be buying Warner Brothers Discovery cable channels, rather than telling David Zaslav to continue spinning them out. And YouTube, while definitely a competitive threat for attention on TV, is not a Netflix competitor for either content or consumer spending.

    The risk of courts anchoring legal analysis to one expansive and theoretically defensible market definition is that it ignores the practical realities of market power and its impact on industries, which is ultimately what antitrust law was conceived to regulate. The continued emergence of YouTube may well be a Netflix concern, but a) Netflix isn’t expecting to pay for the $72 billion price tag here by moving from eight to nine percent market share, and b) Hollywood isn’t panicking because of where a post-merger Netflix would rank on a “TV time spent” graphic. Instead, Hollywood is internalizing the reality that if this merger is approved, it would reduce the number of viable buyers for premium content in TV, and reduce the number of films put in theaters, jeopardizing the financial health of a theater industry that’s already struggling to survive, in part because there aren’t enough movies to show.

    It’s the other side of the pricing power concern. As Netflix dominance becomes further entrenched, it will have the power to pay talent less (because how many others are bidding for original programming?) and dictate terms to theaters, eventually reducing the amount of time any of its movies are shown in theaters (before airing free to its subscribers, exclusively on Netflix). “I think over time the windows will evolve to be much more consumer friendly,” Sarandos said this month, “to meet the audience where they are … all those things we’d like to do.”

    If that policy eventually applies to Warner Brothers releases (this year’s hits: A Minecraft Movie, Superman, The Conjuring: Last Rites, One Battle After Another, Weapons, Sinners, and Final Destination: Bloodlines), it will absolutely accelerate the death of theaters. Then, as movie theaters die, the best path to monetization for feature-length content will come back to Netflix, the platform that will be able to promise an audience of 300 million people around the world, can create hits that generate valuable secondary revenue streams for studios, and will have the bargaining power to negotiate favorable terms to deliver that audience. This economy is already taking shape; it’s how Sony forfeited most of the upside in one of the biggest movies of the year, KPop Demon Hunters, in what was still arguably a good deal for the studio.

    A Warner-Netflix merger would compound Netflix’s negotiating leverage with any Sony movies in the future (because it can always promote Warner and Netflix studio content instead). Meanwhile, the streaming landscape would look like an oligolopoly with Netflix clearly at the top, and Amazon and Disney far beneath them, with a hundred million fewer subscribers and distinct content priorities. The net effect of the reduction in competition will be fewer options for entertainment, and a transfer of profit upside from the talent that makes Hollywood programming to the company that distributes it and monetizes it at a scale that will be impossible for any of its competitors to match. It’s easy to see why that plan appeals to Netflix. It’s also important context for Senator Mike Lee warning, “There are potential monopoly-type issues, but also monopsony-type issues.”

    The shift in market structure and profit incentives would result in higher prices for Netflix subscribers as well as less, and worse, movie and television content. But of course, as noted at the beginning, that shift has been underway for about 15 years.

    The Flattening of Everything

    There’s been a groundswell of opposition to big tech over the past 10 years, yet as that sort of backlash has become ubiquitous and borderline cliche, Netflix has more or less avoided scrutiny. Even as its debt-fueled rise permanently upended one of the most successful industries in American history and trained a generation to “binge watch” a bunch of sleek-looking and forgettable TV, it’s been rare to see mainstream discussions wondering about the net impact of technological shifts and consumption habits that one company spearheaded.

    Whether the Warner Bros. deal is approved or not, I suspect the era of Netflix as Big Tech Switzerland is now over. It’s not that what the company is attempting is morally wrong, but the power grab is too transparent, and the potential impact too clear for the world to see. That, more than any market definition haggling, is why I expect Netflix to lose if this merger is challenged in court. Antitrust is inherently political, and the politics of this move are unpopular on a bipartisan basis.

    Of course, even if Netflix loses today, the structural dynamics of the modern environment still favor its business tomorrow, and those same dynamics remain bearish for the rest of Hollywood. And on that point, the Netflix story is a perfect distillation of the big tech’s impact on practically every corner of modern life. The company began by offering enormous consumer surpluses while legacy incumbents were flat-footed in their response (first with Blockbuster, and later when it took Hollywood six years after the 2013 premiere of “House of Cards” to launch competing products). It thrives today because of unmatched engineering, superior leverage over its costs, and consumer inertia in a market where everyone else got started 10 years too late.

    Consider the social concerns animating tech resentment and Netflix checks those boxes, as well. Depressed that social media companies like Meta are serving mindless content that’s both monopolizing attention and isolating everyone? Streaming TV is not necessarily better, and certainly more literal in its isolation. Worried about the incentive structure of an economy in which aggregators like Amazon, Google, and Meta are leveraging their distribution networks to extract the profit margins from the businesses that actually make the things people buy? Well, that’s not far off from where the entertainment business may land. Curious about the impact on innovation, quality and consumer welfare if big tech companies can impair the ability of new companies to achieve scale and profitably compete with them? That, too, sounds familiar after the past 3,000 words.

    There was a long and entertaining New Yorker profile this week that ended with Konrad Kay riffing on the dangers of conflating financial health with social health. Kay is an ex-banker, one of the co-writers on HBO’s cult classic Industry, potentially a future Netflix employee, and he said:

    “My screen time is eight hours a day, and anytime I feel anything—anxiety, feelings of self-worthlessness, does my girlfriend love me, why am I not a dad, I’m going to die, all the things I think when I have five minutes on my own—this thing denies you all that, in a way that is so pleasurable,” he said. “I’m, like, ‘Wow, this fucking jacket! It’s going to make me feel fucking amazing.’ The jacket comes, and I look good for a day, and then I start to feel that feeling again. The danger of this thing is it flattens the experience of the world. So I can go on Instagram and see some woman I’m not dating, and then I can go on Twitter and see some kid being beheaded in Gaza, and then I can look at the jacket—spending the exact same amount of time on each of them. … And you wonder why people are fucking miserable!”

    The frustrations he describes there are hard to capture with data and hard for most to even articulate, but that doesn’t make them any less valid and widely held. Again, this is not a condemnation, but closer to a fact: Technological change and unregulated big tech growth has created a world that is more convenient for everyone, great for shareholders, but less financially rewarding for producers, and less spiritually fulfilling for consumers.

    A collective reckoning with those realities may not be ideal for Netflix as it seeks to close its Warner Brothers deal, but it’s becoming unavoidable for everyone else. 

    What I’m Reading This Week

    This will be quicker because today’s column ran long, but here are some recommended reads this week.

    Finally, this is not reading, but this chart on the EU’s regulatory revenue is incredible. And, in brighter EU news, I had a great 15 minutes watching this 60 Minutes segment on Swiss watches.

    Thanks for reading, and have a great weekend.

    Sharp Text is extension of the Stratechery Plus podcasts Sharp Tech, Greatest of All Talk, and Sharp China. We’ll publish once a week, on Fridays. To subscribe and receive weekly posts via email, click here.

  • The Forest the New York Times Missed Among the David Sacks Trees

    Welcome back to Sharp Text. If you’re reading this via email, thank you for subscribing. For anyone reading on the web who would like to receive weekly posts, you can sign up here. 

    (Photo by Anna Moneymaker/Getty Images)

    As politics becomes its own genre of pop culture for an entire generation of Americans, laying into the editorial choices of The New York Times has become a national pastime for both the left and right. It was the right’s turn this week, along with many of the most powerful executives in tech, as the Times ran a story on Trump’s AI and Crypto Czar, David Sacks, that was headlined, “Silicon Valley’s Man in the White House Is Benefiting Himself and His Friends.”

    Sacks, for his part, responded on X by posting a six-page letter from defamation attorneys who have previously repped the Sackler family, Project Veritas, and former Harvard president Claudine Gay, while Sam Altman wrote, “David Sacks really understands AI and cares about the US leading in innovation. I am grateful we have him.” Indeed, the Valley’s collective response to the article turned into multiple days of “OpenAI is nothing without its people”-style tributes, but for David Sacks and the federal government. On the other end of the spectrum, reporters wondered about the back-channel text messages that spawned the anti-Times outpouring from venture funds the world over, while The Verge observed the groundswell of Sacks support and ran a story headlined, “Silicon Valley is rallying behind a guy who sucks.”

    Again, for better or worse — almost certainly worse! — these sorts of episodes are part-entertainment now, generating all kinds of shoulder programming for everyone involved. Sacks’ All-In Podcast will undoubtedly have one of its best weeks ever when the post-Times episode is released this weekend.

    With regard to the story itself, past the “Benefiting Himself and His Friends” headline, the body outlines a variety of Sacks-led policy initiatives, but nothing in the reporting ever supports the headline’s implication of nakedly corrupt self-dealing. I think writer Timothy Lee put it best, noting soberly that the story “unhelpfully conflates David Sacks promoting (1) policies that benefit AI companies generally, and (2) policies that benefit specific AI companies Sacks invested in. The examples are almost all (1), but written like they are mostly (2).” I’d add that the story is assiduously not defamatory in a legal sense, but is more pernicious in its perfectly legal smears by conspiratorial implication. What results is a 3,000 word feature that would be misleading to anyone who doesn’t follow the AI and chip policy space (my mom, and most of the Times core audience) and insulting to those who do (people who understand, say, that David Sacks’ chip policies may be controversial, but he does not personally benefit from more Nvidia sales to the Middle East or China).

    Here, I’ll stop short of outright sympathy for Sacks. While I’m a lapsed All-In listener, I’ve heard enough episodes to know that he has deployed similar attacks on all kinds of liberal targets, often relying on the same sort of half-baked circumstantial evidence the Times had on offer. And in any event, most of the conversation around this story, like the story itself, ignores the aspect of Sacks’ tenure that I find most interesting. The Times is just asking questions, wondering why David Sacks wants to work in the government, and how he might be benefiting. Sure. But the better question is, why might the government need to employ someone like David Sacks?

    Sacks is a “special government employee” who’s limited to working for the government for 130 days per year. He had no prior experience in government. He takes no salary. He is subject to many of the same ethics requirements that apply to full-time cabinet members, but the restrictions are relaxed in certain areas. According to White House ethics waivers, he divested $200 million of his AI and crypto assets before assuming the post that was created for him by Trump. The Times cautions that he hasn’t divested all of those holdings, the timing of the divestments is unclear, and Sacks still retains stakes, through Craft Holdings, his VC firm, in hundreds of hardware and software-focused companies that may benefit from a more business-friendly AI policy set by the White House.

    The context the Times omits is that given the investment environment surrounding AI over the past two years, it’s likely Sacks would be wealthier on paper today had he simply never divested any of his holdings and continued to serve in the private sector.

    Zooming out, a similar calculus applies to almost any high-achieving private citizen who’s considering government service. It’s a secondary effect of the K-shaped economy that often goes underappreciated. As corporate profits have compounded over the last forty years, the difference between private and public salaries has become progressively more dramatic. A Supreme Court justice makes around $300,000, for example, while a federal judge at the district level is paid $247,000. There are two dozen corporate law firms that pay ten times those numbers to top partners, and many of them pay first-year associates close to what a federal judge makes. The average staffer at the Bureau of Industry and Security, the Commerce Department subgroup overseeing chip controls, makes $107,366. How much more money might those employees get from Nvidia, where the parking lot is full of lime green Lamborghinis? And, of course, juxtaposing the salaries of financial regulators or Treasury employees with those of the executives they regulate has been a laughable exercise for 40 years.

    Those dynamics are not new, but they are especially extreme in tech, where working in government not only means making far less money, but also that you operate 3,000 miles away from all the most interesting people in the field, and likely forego future opportunities as a result. Meanwhile, what is new today, and what may not be fully internalized by New York Times readers, is that many of the most urgent questions facing the future of the western world relate to technological shifts that have overwhelming political (and geopolitical) implications. Among them:

    • How should the U.S. government incorporate cryptocurrency and stablecoins while preserving both economic stability, regulatory transparency, and the dollar’s global primacy?
    • Who should we sell advanced AI chips to, and what precisely are we trying to accomplish with chip controls?
    • How might the government effectively regulate tech monopolies to prevent a monopolist in one market using its advantages to distort the outcomes in an entirely new one?
    • How should self-driving cars be regulated?
    • What guardrails should be put in place to prevent AI disasters and/or mass job loss?
    • Are there ways to regulate AI without handicapping innovation and imposing regulatory burdens that favor big companies?
    • What sort of policies might delay a war in Taiwan (which would arrest all AI progress for five to 10 years and erase half the stock market’s value overnight)? What’s the most effective way to revive domestic chipmaking capacity?

    There are two reasons charting an effective path forward on any of those fronts will require leaning on people outside of Washington. First, to the extent the U.S. wants to capitalize on the opportunities in an industry that has been the envy of the rest of the world for the past 30 years, it helps to have leaders who don’t reflexively resent tech (rare on the East coast). And second, answering any of the questions above demands balancing domestic and geopolitical priorities alongside industry impact and the secondary consequences of any policy, all of which requires granular knowledge of the technologies, leaders and companies at the center of all this change. With AI, specifically, and tech generally, that kind of nuanced expertise eludes most everyone who has spent their career in academia or government. And perversely, that lack of expertise often manifests in tech policies that are hopelessly over-engineered and counter-productive to long term American interests, like last year’s baffling AI Diffusion Rule (which Sacks helped repeal).

    None of this is to suggest the government should cede all its decision-making to the Valley, or be absolved of the responsibility to perform comprehensive conflict checks and follow the law with respect to executive branch appointments. Nor am I joining the chorus of tech luminaries saying thank you, David Sacks. I’d like to leave room here for the possibility that the Times story was a mess, VC twitter is awful, and Sacks policies are a mixed bag.

    Still, if a venture capitalist’s influence on government policy is depressing to you, I get it, but I would caution that the practical alternative to that AI leadership was Kamala Harris as AI czar, and a 36-page AI executive order under Biden that was grounded in paranoia and equity concern (and partially inspired by Mission: Impossible — Dead Reckoning). There was also the aforementioned AI Diffusion Rule, which introduced three tiers of global chip access, along with nine acronyms (“AIA, ACM, LPP, DC VEU, UVEU, NVEU, TPP, ACA”), while proposing to throttle the flow of U.S. chips and software to more than half the world (creating an enormous gap for Huawei to fill, particularly among U.S. allies in the Middle East).

    American tech policy that effectively navigates the years ahead will require reckoning with the reality of modern government’s limits, as well as the multi-dimensional complexity of its priorities. Rather than casting Kleptocratic aspersions on a part-time government employee with so much industry experience that the appearance of conflicted interests is effectively unavoidable, a more useful Times story might have identified those dynamics and asked whether arrangements like Sacks-as-AI-czar may nevertheless become more common in administrations of the future. Provided there are strong national security and regulatory voices that remain in the room, it seems clear the U.S. government incorporating genuine tech expertise is better than the alternative.

    What I’m Reading This Week

    • Part 1: My Life is a Lie. A great piece on the limits of available economic statistics, the need for a new definition of poverty, and the “valley of death” among working class Americans that breeds resentment and social instability. Some of the numbers in this piece have been questioned as it’s gone viral, but the structural dynamics read as deadly accurate. (Part 2 was also excellent).
    • My Boy. A fantastic and moving piece on raising an autistic son, from my friend Ethan Strauss.
    • How NBA Legend Michael Jordan Is Blowing Up NASCAR’s Monopoly. “Several jurors were dismissed because of their love for Jordan, whereas another was kicked off the case because of her dislike for one of the driving teams involved. And then there was the guy who joked on his juror form that his hobby is ‘heavy drinking;’ he was ultimately chosen to serve.” Wonderful stuff.
    • MAGA’s Aquatic Valkyrie. A comprehensive response to an episode of Pablo Torre’s podcast that seemed pretty naive about how political activism works.
    • Stanford Earth Sciences Chair Collaborates with China’s Nuclear Program. An investigation of a Stanford scientist’s apparent collaboration with the CCP nuclear program; this is one of dozens of examples with respect to the academy’s endemic China problems. Part 1 in this remarkable series from student journalists was similarly disturbing.
    • China is making trade impossible. For anyone new to the world’s trade tensions, this 900-word op-ed is the most cogent statement of the problem (and why, particularly for Europe, there are no good solutions).

    And with that, we’re done! Thanks for reading, and have a great weekend.

    Sharp Text is extension of the Stratechery Plus podcasts Sharp Tech, Greatest of All Talk, and Sharp China. We’ll publish once a week, on Fridays. To subscribe and receive weekly posts via email, click here.

  • The Definitive Ranking of Tech Company Takeability

    Welcome back to Sharp Text. If you’re reading this via email, thank you for subscribing. For anyone reading on the web who would like to receive weekly posts, you can sign up here. 

    Good morning!

    Today’s focus will be tech companies and takes. Having hosted podcasts of all kinds for more than ten years, takes are near and dear to my heart. So the question today is simple: which tech companies are doing the most for the take economy in 2025?

    To be clear, these aren’t judgements on the quality of these companies. Someone or something that’s particularly valuable to the take economy is not necessarily good or bad, but usually provocative, and preferably has a story that’s still being written, leaving plenty of ro0m for half-baked theorizing. For example, we can frame today’s exercise with recent news from Hollywood: the takeability spectrum runs from Robert Redford’s career (uncontroversially excellent, universally respected, what can you say?) to Sydney Sweeney’s career (your mileage may vary!).

    In any event, you get the gist. I won’t be posting next week because of Thanksgiving, so what we’re celebrating today are the companies that all tech content producers, or content consumers, should be most grateful for this year. With that in mind, here are my notes…

    15. Microsoft. The cloud business is fine, Office lock-in isn’t going away, and sure, the Activision deal looks like a disaster and the Copilot efforts are lagging a bit, but this is still a mature and extremely profitable business with an enterprise software moat that has survived for more than three decades. Even the years-long tension with OpenAI ended with Microsoft making a perfectly sensible decision to hedge against OpenAI’s upside rather than bet on its own ability to make great AI products. This is Microsoft under Nadella: smart, unsexy, and by not overtly trying to dominate the world, they wind up (ever so quietly) continuing to dominate the world. Unfortunately, none of is very takeable. Crush Microsoft and you will sound like kind of a moron; evangelize about Microsoft and you will sound like someone who needs to get out more. 

    14. Amazon. Microsoft in e-commerce clothing (complete with a massive cloud business). There may be conversations to have about why the stock has underperformed the rest of big tech over the past few years, or what the company is doing wrong in A.I., but the core business is fine, and the logistics moat is impossible to beat. More importantly, we’re living through one of the wildest eras technology has seen in 25 years. Does anyone really want to spend their time on a deep dive into the Andy Jassy era?

    13. Nvidia. Seems like it should be higher, and definitely would be higher if this list were focused on the companies that produce the most content for Sharp China. In America, though: CUDA lock-in is real, efficiency advantages are only going to become more important, there are 500 ASIC start-ups and not one that matters, and demand for Nvidia chips still outpaces supply every single quarter. It’s very, very tempting to play devil’s advocate on a $4 trillion company that conquered the world in the blink of an eye — people do it on Twitter every single day! — but none of those arguments seem to hold water. Nvidia is great at what they do, what they do is boring but incredibly valuable, and now they are well-positioned to dominate for the foreseeable future. Actually a very frustrating company from a takes perspective, because all the most fun, skeptical takes tend to be wrong.

    12. Netflix. Would have been much higher on this list five years ago! Unfortunately, most of the best Netflix debates have been settled for at least two years. Spending from rival Hollywood studios didn’t erode Netflix’s dominance, and in fact some of those studios are now selling their content to Netflix. Netflix did offer an ad tier, and no, it didn’t kill the subscription business. There’s maybe a medium term question about whether YouTube poses a threat to Netflix, but that argument feels strained in 2025. Netflix is so powerful today that its audience can generate a new franchise for studios, its churn rate is five times better than some of its competitors, and there’s not really any question anymore as to whether its formula is sustainable. And speaking of the formula, this is a good Netflix take:

    11. TikTok. A company that has generated more takes (billions) than profits (???) over the course of its short history, and one that would have been much higher on this list a few years ago. The problem is that TikTok debates are very familiar now: yes, the the CCP could almost certainly use TikTok to manipulate algorithms and access user data; no, the U.S. wouldn’t be violating the First Amendment if it banned the app; and yes, Trump ignoring Congress and refusing to enforce the law is probably his most egregious abuse of law during his second term (a whole different realm of takes). There are also more basic questions — is this app making an entire generation dumber? — that have their own, obvious answers. That said, I’ll happily have any of those conversations. Some of them are important! And while we’re at it, I’ll throw out one more for consideration: TikTok pioneered addictive short-form video and forced Meta to push short form videos of its own, thereby training an entire generation to consume content this way, and further eroding the attention spans of millions of young people. To the extent this trend plays a role in diminishing the influence of of Hollywood and the traditional entertainment industry, which has been a source of U.S. soft power for roughly 100 years, isn’t that also a pretty massive victory for China? It would be a bigger coup than, say, convincing people in Taiwan that the Houston Rockets don’t exist. 

    10. The Other Model Makers. Why is Anthropic doing ads on Ringer podcasts? Do coders love The Big Picture? And what are these aesthetics? The company is pushing millennial-core minimalism that looks like a Hims ad, on one hand, and feels like it’s from 2015, on the other. It seems like the target audience for that “thinking” campaign is “people who want use AI but also lament its existence,” which would at least be consistent with every interview Dario Amodei has given for the past three years. Elsewhere: xAI sometimes looks like a very, very expensive hammer in search of a nail. No one knows what Ilya Sutskever saw or what his new company is trying to do. And how is Mira Murati’s new company, without revenue and without a product, raising funds at a $50 billion valuation? People bag on OpenAI’s spending and revenue projections, but at least there are users, products and cogent goals. This is the economy that makes no sense. All these players have to be on the list, however, because a) everyone enjoys teeing off on overvalued companies and/or effective altruists; and b) these companies are good for takes, because a world where OpenAI, Meta and Google are the only major AI players is far less interesting.

    9. DeepSeek. 10 months ago, might have landed at number one on this list! For about 36 hours in January, the sheer volume of takes surrounding this company seemed like it might pop the AI bubble, and in D.C., DeepSeek’s success was treated as dispositive evidence that chip controls were hopeless, on one hand, or not being enforced properly, on the other. Today, DeepSeek’s R2 release has reportedly been delayed because the company was encouraged by the government to run on Chinese chips, the American AI market is frothier than ever, and the narratives surrounding DeepSeek’s costs ($5 million!) have been debunked. However… Deepseek is high on this list because it’s still used as the rhetorical stand-in for a Chinese open source AI ecosystem (Qwen, Kimi, et al) that might very well be a long-term problem for a variety of U.S. interests (chips, models, U.S. tech leadership around the world). Additionally, with now-close oversight and support from the CCP (with apologies to Meta, rumor has it that Vice Premier Li Qiang has banned rival companies from poaching DeepSeek talent), the next few years will be a fun experiment to see whether the party’s control freak tendencies will impact China’s national champion in AI.

    8. Uber. Very similar to Netflix in that this company had entire armies of skeptics for almost a decade, and it’s harder to sustain any of those arguments in 2025. Unlike Netflix, though, a real disruption threat looms. If we assume that autonomous vehicles will be eventually ubiquitous in a variety of markets, Uber is like a team that doesn’t control its own destiny to make the playoffs. Essentially, Uber will need Waymo, Tesla and perhaps others in the autonomous space to strike out at monetizing their significant hardware investments — via their own apps, or maybe delivery — thereby forcing them to turn to Uber for access to customers, and preserving Uber’s negotiating leverage as an aggregator that can lean on fleets of other companies’ cars to deliver rides, extracting the same margins they would on any other trip. And look, it’s entirely possible that’s how it plays out; everyone already uses Uber and breaking those user habits is tough. But a) it’s easier to create new user habits when you’re offering an entirely new or better service, which Waymo sort of does; and b) while Netflix won by betting against the ability of companies like Warner Brothers, Comcast, and Paramount to thrive in a new technological paradigm, Uber is betting against Google, Tesla, and perhaps Amazon. A tougher row to hoe!

    7. Meta. The core value proposition in the modern era — serving up addictive, mindless content from people you don’t know, surveilling user habits more effectively than any private company not run out of Beijing, and using that data to serve ads not too far off from that scene in Minority Report — may be looking increasingly bleak, but it’s also looking increasingly stable. We’re past the era of semi-regular panics over Meta’s lack of a moat, and the dominance looks as entrenched as ever. (And in fairness, Instagram ads are more useful than every other ad you’re assaulted with on the internet.)

    All that noted, it’s everything else that Meta is doing that provides tremendous fodder for takes. Reality Labs has been happily lighting money on fire for a full decade with no end in sight. Every new pair of Smart Glasses is cool, yet no one in tech seems to understand that normal people don’t want to walk around with a computer on their face. Meanwhile, the AI division gets reshuffled every two months and is now full of poached researchers, on max contracts, who are improving Meta AI products that no one uses, as well as internal AI tools that should improve Meta’s ad products. We’ll see where that goes. Vibes would have been great for takes if the horrified reactions to that product hadn’t been instantly eclipsed by a rapturous reception for Sora. Speaking of which, it’s seems like Meta senses that OpenAI and ChatGPT are a real threat, and is responding by driving up the price for talent and hardware, while also releasing open source models that could theoretically undercut OpenAI’s long term pricing power. It’s defensive, but proactive, and at times very entertaining.

    On the other hand: Will any of this work? Has Zuck in Founder Mode actually been additive to Meta’s business for the past 10 years? And outside of buying Instagram and WhatsApp and copying features from Snap and TikTok, when was the last time Meta built something new that people liked? These questions are becoming evergreen, and are at least more interesting than discussing Instagram’s ad load.

    6. SpaceX

    5. xAI and X

    4. Tesla. I’m grouping all of Elon’s companies together because in practice, discussing one Musk company usually invites discussion of a few others. Related: The number of well-capitalized misses from Zuckerberg at Facebook should underscore just how hard it is to marry vision, timing and execution at scale, which Elon has done over and over again.

    There’s an alternate timeline in which Tesla lands in the Netflix zone of this list, having successfully disrupted to the American car industry for the first time in 100 years, proving all its doubters wrong, and now sitting entrenched as by far the most dominant EV maker in the US (although China is making the rest of the world a lot more interesting). What’s great about Tesla, though, is that the company is pushing several orders of magnitude beyond that goal. From The Information:

    Optimus is Tesla’s biggest long-term bet. Musk has said there will eventually be more humanoid robots than cars in the world, and that Optimus will one day be responsible for about 80% of Tesla’s market capitalization. Inside Tesla, he’s pushed the Optimus team to find ways to use the robot in tandem with another big, nearer-term bet: the Cybercab, according to a person with direct knowledge.

    That includes Musk’s desire to have the Optimus robot sit in the Cybercab so it can deliver packages. That should be possible: newer versions of the Optimus robot are capable of consistently lifting and moving around with roughly 25-pound objects for three to four hours on a 30 minute charge, another person with direct knowledge said. But the connection between the robot’s torso and legs isn’t flexible enough to allow it to seamlessly get in and out of a Cybercab, according to the first person.

    Ben wrote more about this on Tuesday, but let’s marvel at the insanity of that report. What’s envisioned above involves autonomous technology that doesn’t fully exist yet, Cybercabs that don’t exist yet, a market for automated delivery that doesn’t exist yet, and robots that do exist, but are not functional enough to drive around delivering packages. So, a lot of moving pieces! On the other hand, if anyone could will that science fiction vision into reality… And see? This is how you end invoking SpaceX catching a rocket as it re-enters orbit, as well as explaining that xAI will be critical to realizing any of those visions.

    Elon is a maniac, with a Twitter account that’s completely intolerable to all and politics that are intolerable to many, but that shouldn’t distract anyone from the sheer volume of genuine breakthroughs that he’s pushing toward at all times, making technology more interesting for everyone. He’s the antidote to Meta building a trillion dollar business on the strength of Reels. And the more grand his ambitions and accomplishments become in the physical world, the funnier it becomes that he also owns X, and that him buying X had a bigger impact on American life than all of his other businesses combined.

    Additionally, in the middle of all this, Musk still finds the time to sue Sam Altman every three weeks.

    3. Google. What a two year ride. In 2023, the company that invented the transformer was behind in AI and rushing out hamfisted demos in Paris, their safety team celebrated Black History Month by accidentally making all history black, and ChatGPT was being hailed as the first credible threat to the search business since the Bush administration. Two years later… maybe this is going to be most powerful company the world has ever known? The search business continues to generate obscene profits and a Federal Judge was recently too scared to disrupt their distribution deal with Apple despite explicitly finding it illegal. Gemini 3 is state of the art (though it’s unclear how much that means at any given time), Veo is far and away the best in AI video, and Waymo is expanding to 5 more cities as of this week. YouTube is the most dominant entertainment platform on the planet, which will not only help Google own the future of consumption, but should also help the company’s AI efforts. YouTubeTV could be the cable bundle of the future if the company ever decides to make an aggressive play to own that market.

    The advantages and opportunities in front of Google so are obvious and abundant that I’d be open to arguments that Google is too high on this list, as it’s now become clear to everyone that this company can and should win the future on a variety of fronts. On the other hand, I leave room for the possibility that Google and its massive bureaucracy will fail to capitalize on some or all of the foregoing opportunities, and I don’t know anyone in my personal life who prefers Gemini to ChatGPT. We’ll see. In the interim, I’m just enjoying the shift from the whole world asking whether Google needs to fire Sundar Pichai to now talking about him like he’s Keyser Soze:

    2. Apple. This list is ultimately a celebration of takes, and in the current environment, is there any hotter take than just skipping out on AI spending altogether? I’ve come to admire it, and as a very satisfied iPhone 17 Pro Max user, I think it’s probably the right call. I don’t plan on switching phones anytime soon, neither do you, and besides, I don’t trust modern Apple to execute if the company were to invest hundreds of billions of dollars in AI infrastructure. Would they really better off flailing around in the wildnerness like Meta?

    Elsewhere, Apple continues to collect a 30% fee on every app store transaction, an egregious practice that has generated a full decade of Stratechery hand-wringing and seems to face renewed scrutiny every six months. While I’d prefer if that behavior eventually led to meaningful consequences for a company that is now dangerously dependent on extortive Services revenue to drive growth (the app store fees, collecting a $25 billion toll from Google every year, and my favorite: launching an ads business just before deploying ATT changes that killed everyone else’s ad business), Apple is betting that regulators are too lazy to act, and companies are too desperate for Apple’s audience to do anything about it. Honestly, a reasonable calculus!

    Finally, Tim Cook’s religious dedication to operations optimization was so extreme that it inspired one of the best technology books of the decade (mainly for its history of Apple) and one of my favorite Stratechery interviews of the year. This would be my guess for the controversial strategy that actually hurts Apple’s bottom line at some point in the next ten years, but we’ll see. Either way, Apple at once looks more vulnerable than it has for about 15 years, and more dominant than ever. Everyone has an opinion on what Apple should be doing and why, and it powers the take ecosystem all year long. However…

    1. OpenAI. Listen.

    OpenAI may or may not be the most important company of the future. There can be no doubt, however, that we are witnessing one of the most takeable enterprises in the history of the world.

    From the day it was founded — with a non-profit corporate structure that sought to build AGI and then control it themselves “to ensure artificial general intelligence benefits all of humanity” — this company has divided the audience and invited either passionate support or aggressive eye-rolls.

    10 years later, not a week goes by without a story that makes the leadership look kind of ridiculous (a Larry Summers snafu here, an Altman conniption there, and a friendly suggestion to the U.S. government over here), yet ChatGPT stands alone as the one AI product that practically the entire world continues to use and enjoy on a regular basis. And as fevered as the current landscape in tech can look, we should all be clear that the defining characteristics of that atmosphere — crazy lending, circular partnerships, overheated market reactions, uncomfortable social implications, and rapid uptake that makes anything seem possible — are all almost entirely attributable to the success and ambition of one company.

    What I love about OpenAI is that it should be impossible for anyone to bet against a start-up with 800 million weekly users, but the company makes it so tempting. Not content to merely compete with Google, OpenAI is also trying to be a hardware company that competes with Apple (Jony and Sam saw you across the bar and like your vibe), the company’s also competing with Meta for attention and “time spent” on their app, and, according to Sam Altman in his Stratechery Interview, will compete for share in the enterprise space. Sam and co. are trying to do everything, and be everything, and will soon be serving users “mature content” (an arguably bearish signal if leadership is that desperate to juice engagement). The company also appears to be losing tons of money as it throws these ideas at the wall, though precisely how much is anyone’s guess.

    That last bit is the crucial aspect of why this company continues to generate so many frenzied conversations, not only because OpenAI’s future prospects depend in part on how much it costs them to serve their product and that distinguishes ChatGPT from the stickiest consumer hits of the past (AI is, uh, not zero marginal cost). What’s most important is we don’t know. Incomplete information is a feature here, not a bug. OpenAI is a private company that doesn’t have to report out its costs and doesn’t have to answer to shareholders as it attempts five moonshots at once. The lack of transparency and accountability, coupled with a market that’s being redefined every month, leaves room for the whole world to theorize on what will happen next and why. Almost no OpenAI prediction in 2025 is definitively falsifiable.

    Think OpenAI is the new AOL? I can buy that argument. But if it’s not, where might this story go? Will OpenAI hardware pose a threat to Apple, while its software becomes elemental to how the whole world works, shops, and learns? Do you trust Sam Altman? Will he still be running this company in four years? Is ChatGPT destroying higher education?

    Whoever you are, wherever you are, I bet you’ve got a take.

    A Taylor Sheridan Starter Kit

    Brett asks: 

    As somebody who’s only dipped their toes into the Sheridanverse (Sicario + Hell and High Water) where do you recommend starting with the rest of his work?

    Great question. Sheridan is an acquired taste and someone people never get there; my wife finds his shows to be too violent. The movies you mentioned are great in a more conventional, critically acclaimed way, whereas his TV shows take traditional TV formulas and heighten the drama with either violence, bizarre plots, or history that you won’t find elsewhere on TV. In any event, my recommendations would be the following:

    • 1883. Probably his best television work to date. The one and only season chronicles the Dutton family ancestors (stars of Yellowstone) as they make their way across the American frontier. This show is brutally violent at times, poignant at others, and it’s all gorgeously shot. And no, you don’t need to watch Yellowstone beforehand.
    • 1923. Another Yellowstone prequel. The pacing can be pretty languid at times, and there’s a sadist plotline that was probably a bit much, but I came to enjoy it over the course of the first season, and love it by the end of the second and final season. It’s his most sentimental work, and it features Helen Mirren and Harrison Ford having a great time. Maybe my favorite Sheridan project.
    • Landman. Great collection of stars — Billy Bob Thornton, Demi Moore (sort of), Jon Hamm, Ali Larter, a number of character actors from other Sheridan vehicles — and a killer concept for a show, unpacking the oil industry in West Texas. It has about six more storylines than it needs, there is a Jerry Jones cameo at one point, and when I wrote that Sheridan shows are often weird and fun in a way that’s refreshing, I was thinking of Landman.
    • Lioness. For people who loved Sicario, but also secretly enjoyed Sicario 2: Day of the Soldado. Drug cartels are again the enemy here, special ops are involved, and no, these kill missions have not been sanctioned. The show is gripping from the opening scenes of Season 1 and more or less maintains that pace throughout the run, though I still have lots of questions about Nicole Kidman’s marriage.

    Yellowstone is also an enjoyable watch for the first two or three seasons, though I’ve been partial the work Sheridan has done since. And while we’re here… I was happy with how that Sheridan article came together, but as much as I celebrate Sheridan for taking more interesting creative risks than, say, The Bear, I don’t want to denigrate too much of modern TV, mainly because I still avidly consume lots of it. So, a handful of non-Sheridan recs for anyone who’s looking for something to watch over the holidays:

    • Task on HBO is the best show I’ve seen this year.
    • Industry on HBO is my favorite show of the decade (three seasons; the first one is a little bit weird and may be off-putting, but it’s the rare show in the streaming era that gets better with each episode, in every season).
    • Platonic on AppleTV is a great comedy to watch with your spouse. Much better than, say, The Studio.
    • The Gilded Age is another outstanding spouse show; nails the formula for compulsively watchable procedural.
    • America’s Team on Netflix. The best sports documentary I’ve seen this year.
    • Beckham on Netflix. The best sports documentary I saw last year, in case anyone hasn’t seen it.
    • Pluribus … Still making up my mind on this one, but I’m enjoying myself so far.

    Letters of Recommendation

    • Empire of AI is wildly misleading about AI water use. Andy Masley with a piece that went viral on tech Twitter this week and was very gratifying to read. The notion that data centers use dangerous amounts of water is one of the more pernicious talking points distorting the modern AI conversation, and its persistence among the mainstream, particularly on the left, is good evidence that our information systems are still pretty broken.
    • The Bitter Lessons. Dean Ball with a really well-observed piece on the AI “race” between the US and China, and the ways in which that metaphor fails to capture the current dynamics.
    • What the Movies Need from Sydney Sweeney. Good, short column on the dignity of Sydney Sweeney’s (mostly terrible) movie career, and why Ross Douthat hopes she sticks with it.
    • How NOT to Negotiate with China. A brief note from Robin J. Brooks on how Trump should have handled the rare earths standoff, and why a modest tariff probably would’ve worked better than the maximalist strategy the U.S. side chose instead. He might be right, and he’s definitely right about the underlying dynamics in China.
    • Is Gambling Really Ruining the Integrity of Sports?. Jay Kang with a fair counterpoint to the reflexive argument that gambling is corrosive to the long term interests and integrity of sports leagues. I’m not sure I agree, but it made me think.
    • america against china against america. I recommended this on Sharp China Wednesday, but if you’d like a corrective to the sycophantic videos from Hasan Piker in China this week, this (very long) travelogue from Jasmine Sun was terrific, as she traveled to Shenzen, Shanghai, Yuyao and Hangzhou and visited a variety of tech companies along the way.

    Also: this is not writing, but I thoroughly enjoyed this three minute video from my friend Spike Eskin on the “consensus of fear” in modern MLB awards voting (and lots of other places).

    And with that, we’re done! Thank you to everyone who’s subscribed and written emails; the early response to this newsletter has been very encouraging. If you have questions for future newsletters, you can email me here. And since I won’t be publishing next week, have a great Thanksgiving!

    Sharp Text is extension of the Stratechery Plus podcasts Sharp Tech, Greatest of All Talk, and Sharp China. We’ll publish once a week, on Fridays. To subscribe and receive weekly posts via email, click here.

  • The NBA Cup Doesn’t Have to Be Terrible

    Welcome back to Sharp Text. If you’re reading this via email, thank you for subscribing. For anyone reading on the web who would like to receive weekly posts, you can sign up here. 

    Good morning!

    A few weeks ago I mentioned that I’d experiment with the format of these newsletters, and one feature I’d like to start this week is recommended reading. There are a few reasons I launched this site, and to be completely honest here, one is that without a forcing function to think critically and read and write at length, I worry that recording podcasts, reading tweets and watching short-form video might slowly lobotomize me. So, in the spirit of avoiding that fate and celebrating good writing, here are five recommendations from this week:

    Also: If you have questions or topics you’d like to see addressed in a future newsletter, you can email me here. Now, onto the main topic this week.

    (Photo by Scott Taetsch/Getty Images)

    We’ll focus on basketball today, and let me start here: I don’t hate the NBA Cup. 

    Damning with faint praise, sure, but it’s sincere. Each of the past two years, I’ve complained about this tournament, I’ve suggested ways to improve this tournament, and by the end, I found myself appreciating that for one week in December, the entire basketball ecosystem focuses on three basketball games across the Cup semifinals and final. My take for now is that the current version of the Cup is, narrowly, 1 better than nothing.

    More importantly, something like this should exist. The NBA season starts off with a bang and then immediately fades to the margins of the mainstream sports conversation, leaving hardcore fans to immerse themselves in an ocean of regular season games that don’t matter very much. Assuming the league is never going to shorten the regular season to 60 games and start every season on Christmas Day, an early-season tournament is a fun way to occupy those fans for the first trimester, with an outside chance of attracting mainstream attention. It can work. 

    It can definitely work better than it does now.  Last Friday night—a “Cup Night” in the NBA’s words—saw 11 matchups decided by an average margin of 21 points in games that were forgotten as soon as they happened. Last month I heard one of my favorite basketball podcasts “preview” the Cup, and the host had to preface the discussion by admitting that he doesn’t care about the event and finds it contrived and annoying. 

    For anyone reading who’s unfamiliar with what’s happening here: The NBA Cup is described by the league as “the league’s annual in-season tournament, which provides players and teams with another competition to win, engages fans in a new way and drives additional interest in the early portion of the regular-season schedule.” It was created two years ago as part of an effort to sell a skinnier rights package that would go to a third TV partner. In that respect, it’s already a success. This year’s NBA Cup knockout round will be broadcast exclusively on Prime Video, which is paying the NBA $1.9 billion per year for the next 10 years. 

    That’s why we’re here today. There are ways to make this event a lot more compelling over the next 10 years, and in the interim, I’d also argue that the Cup in its current form is a useful a window into the ways the modern NBA is lost as a more general matter. The branding is a mess, even players have no idea why it matters, nobody pays attention to the standings until the final night of group play, and even then, interest is marginal. Rather than at least rely on nostalgia and history to elevate the tournament with fans — the Kobe Bryant Cup? the Stern Cup? — the league sold the branding rights to Emirates, as part of a “layered, multiyear marketing partnership that also makes Emirates the official global airline of the league and its first referee jersey patch partner.” Rather than devising competitive stakes that would get teams, fans and media invested, the league offers bonuses to the players to incentivize them to play hard. And rather than hold the league accountable for creating an event that has failed to resonate and may not have any real reason to exist (but for the Amazon money), what’s left of the NBA media is mostly mum or politely sarcastic, content to ignore the implications of a pretty big swing that has mostly missed. 

    To me, the lesson of all this is clear: the modern league office is much better selling basketball to advertisers and TV partners than to fans. But it doesn’t have to be that way forever. So, in case anyone at the league or Amazon is listening, let me offer two fixes: one that’s obvious and simple, and one that’s more radical.

    The Courts Have to Go (And Brand Integrity Matters)

    It would be reductive to argue that 30 garish courts are the sole reason nobody takes the Cup seriously, but I’m tempted, and it can’t help the Cup’s cause if millions of basketball fans associate this tournament with a gimmick that makes the games harder to watch. The league, for its part, explains that each Cup game occurs on a court that’s “rooted in the home team’s core color.” And as you can see above, the Nuggets’ core color is… magenta? Alright then.

    The NBA chose these courts in an effort to differentiate Cup play from the rest of the regular season. It’s an understandable goal, but the cure is worse than the disease. Here’s more from the league, from the Washington Post last year: 

    “[NBA Commissioner Adam Silver’s] vision of creating a vehicle to separate these games from all other games was certainly brilliant,” said Christopher Arena, the NBA’s head of on-court and brand partnerships. “How do we double down on that? Having the courts continue to be painted made a lot of sense.”

    … “However polarizing [the painted courts] might have been, it was mission accomplished,” designer Victor Solomon told the Washington Post last year. “They made a statement and [gave viewers] a visceral reaction to what you were watching. … If you’re causing conversation, it’s not necessarily the worst thing in the world.”

    That is a remarkably shortsighted way to view marketing. And here, I’ll reiterate that the Cup is a keystone to understanding lots of failures of the Adam Silver era, one of which has been a tendency to conflate social media conversation about the league with real, meaningful resonance. Increasing brand awareness is not positive if it comes at the expense of preserving the integrity of the brand itself. 

    So yes, the courts are a bad idea first and most obviously because of the UX issues cited in the tweet above: If you’re a basketball league, don’t make it more annoying for fans to watch basketball.

    More than that, though, those courts represent a lack of confidence in the NBA product and a lack of ambition for the event the league’s trying to sell. It’s like the folks at the league office conceded that nobody would care about the tournament itself, so they settled for generating tweets about how much everyone hates the courts. For reference, Boise State and Eastern Washington play on blue and football fields, and that makes sense to me; they are Boise State and Eastern Washington. The NBA is the best basketball league in the world, with 78 years of goodwill among American fans, and many of the most famous superstars in all of sports. 

    If the league wants to succeed with something new, it should build on what’s already successful. Lean into the history and brands that have powered a $76 billion business with fans all over the world. What we’ve gotten instead is every team playing on a court that’s loudly unrecognizable, and every home team wearing their “Nike NBA Statement Edition” jerseys, which change every year.2 It’s corporate insanity. For example, the Warriors are the most successful brand the NBA has launched this century, with Steph jerseys popular all over the world. Next Friday, they’ll host a Cup game wearing generic black jerseys no one’s ever seen before and playing on a court that’s inexplicably gray and black (again: would like to learn more about who’s choosing the “core colors” here). 

    This shouldn’t be that hard. Play on normal hardwood floors that make the games familiar and easy to follow. Have teams wear throwback uniforms from 30 years ago (everybody knows and loves them) instead of one-off Nike jerseys that are foreign to even diehard fans. Differentiate the look of these games by putting a giant cup trophy in the middle of every court, like the old NBA Finals logos. This approach would be tasteful, distinct, and as the years pass and fans begin to care about who wins the NBA Cup, seeing the trophy at center court could make these games feel like a real, elevated event, especially by the knockout round. 

    That brings us the second solution. Abandoning the “core color” courts would make the Cup less embarrassing, but that only gets the league back to neutral. How do you move the needle in a positive direction? 

    Give Teams — And Fans — A Reason to Invest

    The winner of the NBA Cup should get the number one pick. The runner-up should get the fifth pick. The teams who lose in the semifinals should get the 10th and 15th pick, with the order to be determined by point differential in the semifinal games, thereby making the Group Stage and early knockout rounds more dramatic. And each of those first round picks should accrue to the winning teams in addition to the picks they already have, so that going forward, the first round will have 34 picks.3

    Here, again, the NBA should sell this tournament by relying on aspects of its business that are already working. The “core color” courts were conceived to generate social media conversation, you say?

    Well, what actually drives an amazing amount of organic social media conversation is a year-round obsession with team-building: draft picks, trades, and highlights of 18 year-old players that could potentially be the face of a new generation. Today’s NBA media keeps tabs on draft prospects all year long, and most fans are already familiar with the names Darryn Peterson and A.J. Dybansta. Leaning into that interest is a no-brainer. The league could generate meaningful competitive stakes for its midyear tournament, which, in turn, would be covered extensively across new and old media, all of which would elevate the profile of teams that make it to the Final Four, as well as the college stars those teams are competing to draft. A few of those players will then go to good, nationally relevant teams that will headline the Cup in future years. In Stratechery parlance, I believe this is called a flywheel. 

    The core problem with the Cup is that when someone asks why the tournament exists, or why the winner matters, no one has a good answer. It’s not clear teams treat these games any differently, and fans certainly don’t. One of the first things I heard about this tournament was an announcement that the league would distribute an additional $18 million in salary among the teams that advance to Vegas. The purse for players has gone up each year, but three years later, I’m still baffled the league launched this event by leading with a concerted effort to incentivize players, but zero competitive implications for NBA organizations, and no real reason for fans to invest in the outcome.

    Imagine if, a month from now, the Pistons and Thunder are playing in the Cup Final with a chance at the number one pick on the line. Detroit is currently on an eight-game winning streak and would be at the end of Cinderella run in that scenario. The number one pick would be an opportunity for Cade Cunningham, Ausar Thompson, and Jalen Duren to add one, more truly elite running mate and become a perennial title contender for the next 5-7 years. Or, they could win the first pick and trade it for a superstar like Lauri Markkanen (along with additional firsts from Utah) and use that to springboard them to title contention for the remainder of this season. Either way, the implications for that team would be massive, and an upset win would take an enjoyable-but-marginal story in Detroit this year and turn the Pistons into one of the biggest stories in sports.

    Or, say OKC wins. The Thunder were the most dominant team in the league last year, they look even more dominant this season, and they still have an embarrassment of draft pick riches to fill out their roster as the nucleus gets more expensive the next several years. How unfair and infuriating would it be for Presti, Shai, and Jalen Williams to end up with the literal number one pick? How much distance does that put between the OKC dynasty and the rest of the league over the next decade? And how much fun would America have rooting against the Thunder not only in the Cup Final, but for the rest of the decade (if they win)? 

    Even before you get that far, putting extra first round picks on the table would juice the end of group play and have the entire NBA community paying attention.4 For example, did you know the Toronto Raptors are currently 2-0, and leading “East Group A” in the Cup standings? Probably not! Because that distinction is completely meaningless. But add in a chance at an extra top 15 pick — 1, 5, 10, or 15 — and Raptors fans consigned to rooting for a play-in team all year would have reason to go all in rooting for RJ Barrett and Scottie Barnes to make a run to Vegas.

    Others in media have addressed Cup apathy by suggesting the league guarantee home court advantage in the playoffs for the Cup winner, or by making Cup wins worth more in the standings than regular season games. The problem with those sorts of proposals is that fans wouldn’t really care about those stakes, it’s not clear that teams would alter their behavior all that much, either, and finally, adopting either approach would further jeopardize the integrity of a regular season that’s already starved for meaning. Let’s not do that. 

    The draft, though? The number one pick went to the Mavs last year, rewarding an organization that had just made one of the most unforgivable trades in the history of sports. The Draft already has no integrity, and more often than not, it sends great players to dysfunctional organizations that don’t deserve them. Upending that system is fine, and almost certainly a net positive for the league.

    Addressing the Skeptics in the Room

    The draft pick idea has been met with a few objections when I’ve mentioned on podcasts in the past, so let me address four common refrains.

    Objection #1: “Players won’t play hard to get a draft pick that could replace them.” This makes some intuitive sense, but that’s not really how the league works anymore. Roster turnover is incredibly high in the current CBA environment, most role players understand they’re replaceable, and every high stakes game they play is effectively an advertisement for their next deal or next team. As for the superstars, if players like Giannis Antetokounmpo or Nikola Jokic have a chance at extending their title window by acquiring a number a top five pick that can be used on a potential superstar or traded for one, they’d be crazy not to be 100% invested (or, as the skeptics fear, to tank the games for fear of being replaced?). The key here is that draft pick incentives would be valuable enough to make entire organizations care about the Cup way more than they do today. Stars, the coaching staff, the GM, even owners… If there’s a chance to secure the number one pick, organizations will eventually treat these games like playoff games.

    Objection #2: “Casual fans don’t care about draft picks.” First, the casual sports fans in my life don’t currently know the NBA Cup exists, so the league has nothing to lose on this front. Second, are we sure casual fans wouldn’t pay attention? No sport has ever decided its number one pick in a game before. The way players respond to the stakes would be a subplot unto itself, and because the stakes are genuinely important to the best teams in the league, old and new media would cover the Cup non-stop and without apology (unlike the podcaster I mentioned at the top). And, as an added bonus, if the league wants this event to acquire any kind of historical heft, tying wins to franchise-altering good fortune goes a long way toward accomplishing that goal. If the Nuggets were to win the number one pick at next month’s Cup Final, the first seven years of Dybantsa’s career in Denver will remind fans of how much fun they had on that Cup run, and the Cup highlights be run back constantly by media if/when he ascends.

    Objection #3: “Sir, this is a Wendy’s. The Cup is not important enough to justify upending how the league does business, or even writing this now-2,5000 word column.” Fair, and I apologize. But hold that first thought!

    Objection #4: “Rewarding Cup winners with lottery picks destroys parity and sabotages the pipeline for small markets to acquire superstars.” See, this looks like a bug, but it’s actually the feature that makes these changes most appealing to me.  

    Parity Is Great for the Cup and Bad for the League

    Silver and others with the league have explained the lack of competitive stakes for the NBA Cup by citing English soccer tournaments that have attained meaning of their own, independent of the Premier League championship. This analogy ignores about 150 years of history imbuing those tournaments with meaning,5 as well as fewer games across a soccer regular season, thereby making additional games more compelling.

    Speaking of the season, though, the reason the Cup exists, apart from the Amazon deal, is the league’s correct assessment that fan attention wanes across 82 games and six months, especially during football season. That kind of apathy is bad for business. Silver’s office has tried to solve this problem structurally, with the tournament, and systematically, through a new CBA that has made it harder for teams to aggregate star talent and created a landscape with 20 pretty good teams as opposed to three or four great teams. The thinking is that a leveled playing field gives more teams a realistic shot at a title, and gives fans a reason to stay invested. Here, the NBA’s trying to emulate not English football, but American football. 

    The problem, again, is structure. The NFL has an 18-week regular season and one game per week; using parity to explain the popularity of league is a mistake. Football is the best sport for television in the history of the world, there are limited windows to watch, and the NFL ends the year with a single-elimination playoff. Of course those games draw massive audiences.6 The NBA, meanwhile, has to capture attention across nine months, including 82 games of the regular season and two-and-a-half months of seven-game playoff series. Parity, in that structural context, just renders most teams forgettable and interchangeable. 

    Ironically, this is the area where soccer has the solution. Superteams work great in soccer. Fans watch them all year long, hate them or love them, and when two great teams play one another, the world stops. 

    That’s not altogether different than how the NBA has succeeded across time, yet the league has run the other direction from the first 75 years of its history. Instead, and without parsing too many CBA specifics here, Silver’s regime has instituted a CBA environment that would render it close to impossible to keep the Jordan Bulls dynasty together in the modern era, and would likewise short-circuit attempts to recreate LeBron’s Heat or Cavs teams or the Warriors dynasty. Apart from how frustrating the CBA restrictions have become for fans of playoff teams who now watch their favorite teams turn over half their roster every two years, it’s stunning that anyone thought this was a good idea from a business perspective. 

    Which brings us back to the Cup. Make no mistake: if the league were to adopt my plan, winning the Cup or even advancing to the Final would be a massive long-term competitive advantage for Cup winners. Maybe that feels too random. But is it really preferable to preserve a status quo in which many of the league’s best players are stranded on teams that have no flexibility to improve the roster? Do we really need 15 teams at the top of the league that are pretty good, not great, and ultimately forgettable?

    Using this tournament to award to give top 10 picks to some of the best teams in the league wouldn’t solve the parity problem overnight, but it would be a step in the right direction. First of all, a handful of the best young players would go to playoff teams each June, putting them in a better position to learn, succeed and play high-stakes basketball earlier in their career. That’s better for the NBA overall. Second, bad teams would still have plenty of bites at the apple throughout the Lottery (OKC’s big three was drafted at nos. 2, 12, and 11). And third, the best teams would be afforded more high-end talent to fill out their roster (and/or tools to make more immediate upgrades), which ultimately improves the product at the very top of the league. And finally, those upgrades would happen in a perfectly equitable way: won on the court, fair and square! This wouldn’t be KD going to the Warriors because the players’ union wouldn’t smooth the cap; no one could fault a good team that became even better after it went undefeated in Cup Games that the whole world watched, and wound up with Darryn Peterson at the end. And how many fans would be sitting at home wishing that Peterson went to Brooklyn instead?

    Yes, maybe OKC wins the next 8 Cups and next 8 titles in this scenario, and they turn into greatest dynasty of the century, but even that would create a wonderful villain to root against and give everyone a historic team to watch. Alternatively, this is still is a single-elimination tournament where anything can happen. Parity emerges organically in this context. That’s part of the fun! So maybe OKC dominates in perpetuity, but it’s more likely that a team like the Nuggets or Wolves adds the number one pick and levels the playing field with Sam Presti and his mountain of assets for the rest of the decade; or maybe a team like the Pistons, Raptors, Magic or Knicks could shock the world, add a future superstar, and help the East reclaim some dignity.

    I’m spitballing at this point,7 but the most important takeaway is that each of those scenarios is a hundred times more compelling than the Lakers or Bucks winning the past two Cups, and announcers telling us that each player just earned an extra $500,000. There is a smarter way to do this. Now that the Emirates and Amazon contracts are signed, putting some thought into making people care about this event, and taking some risks, could make the Cup so much better for fans.

    And maybe it’s not a coincidence if that approach would also be better for the league’s business.

    Sharp Text is extension of the Stratechery Plus podcasts Sharp Tech, Greatest of All Talk, and Sharp China. We’ll publish once a week, on Fridays. To subscribe and receive weekly posts via email, click here.

    1. The Cup in its current iteration is not cost-free. In addition to an assault on the eyes every Friday night for the first six weeks of the season, the tournament is awfully disruptive to the rest of the regular season schedule, leading to lots of early season back-to-backs and and an uptick in blowouts and sloppiness, as observed by Ryen Russillo a few years ago (starts at 17:00). ↩︎
    2. I checked, and the inexplicable Nike Statement Edition uniforms that change every year are distinct from the Nike City Edition uniforms, which also change every year. Don’t get me started. ↩︎
    3. Listeners will know I’ve floated a version of this idea on Greatest of All Talk in each of the past two years, pushing for the winner of this tournament to get a top five pick (specifically: the fifth best lottery odds, and a chance at number one). I realize now that my previous idea was too nerdy and technocratic, and that I was suffering from the same problem as the league itself: trying to make the Cup work, without really leaning into it. ↩︎
    4. Likewise, deciding the 10th and 15th pick by single-game point differential could make for some great theater in the semifinals. ↩︎
    5. The FA Cup began more than a century before the Premier League was founded. ↩︎
    6. And, parity aside, the most popular football teams of the century are the Chiefs and Patriots. ↩︎
    7. While I’m here: Move the Cup Final Four from Las Vegas, where they tip games at 3:30 and 6:00 pm locally and atmospheres have been dreadful each year. Play the game in New York City, full of hoops fans from all over the country, and do it at Madison Square Garden, the best stage the NBA has. Sell tickets to a raucous double-header on Saturday night, and play the finals at 8:30 P.M. the following Monday. But OK, OK. I’m leaving the Wendy’s now. ↩︎

  • A Dissenting View on Trump’s Tariffs

    Welcome back to Sharp Text. If you’re reading this via email, thank you for subscribing! For anyone reading on the web who would like to receive weekly posts, you can sign up here. 

    On Wednesday, the Supreme Court heard oral arguments in V.O.S. Selectinons, Inc. v. Trump, a case that contests the legality of President Trump’s “Liberation Day” tariffs. The hearing did not go well for the administration.

    Across two-and-a-half hours, Justices from both the liberal minority and conservative majority peppered Trump’s Solicitor General with skeptical questions about the scope of the tariffs, the lack of Congressional approval for any of these measures, and the tax these policies are imposing on Americans. The oral arguments were undoubtedly gratifying to experts on both the left and the right who have spent most of the year asking the same questions, arguing that Trump’s tariffs are plainly illegal on one hand, and wildly counterproductive on the other.

    I’ll offer a different perspective today. Reading the law, I think Trump’s tariffs may well be legal and consistent with the statute he cites for authority, and following the news for the past seven months, I think there’s good evidence that Trump’s use of tariffs has been appropriate and effective.

    First, the case. The Court’s holding will turn on the interpretation of a 1977 law called the International Emergency Economic Powers Act (IEEPA), which the Trump Administration invoked to impose a global regime of tariffs. In August, the Court of Appeals for the Federal Circuit held that IEEPA does not grant sweeping authority to the executive branch to unilaterally reshape the global economy. That sort of power is typically reserved to Congress. 

    The legal question is very much live and unresolved, at least for a few more weeks. Prior to April, no President had ever invoked IEEPA to impose tariffs on a hundred countries at once. While the Constitution grants Congress the power to “lay and collect Taxes, Duties, Imposts and Excises” and to “regulate Commerce with foreign Nations,” the text of the statute at issue grants the President authority to “deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat.” Upon declaring such an emergency, under IEEPA, the President has the authority to “investigate, regulate, or prohibit” any transactions in foreign exchange. 

    The language in that law is adapted from a 1917 law—the Trading With the Enemy Act (TWEA)—that was expanded in 1933 to account for national emergencies besides war, and expanded again in 1941, one week after Pearl Harbor, to explicitly grant the President authority to regulate the importation or exportation of goods. TWEA’s scope was narrowed by Congress in 1977 and limited to wartime scenarios, but simultaneously, Congress passed IEEPA, which, the Supreme Court previously found, granted “essentially the same” set of TWEA authorities to the President, while added a peacetime procedural requirement that the President report to Congress on his efforts (“The authorities granted to the President by § 203 of IEEPA are essentially the same as those in § 5(b) of TWEA, but the conditions and procedures for their exercise are different.”).

    Lest I spend this entire article retracing legislative history, all of the above is noted only to say that the case before the Supreme Court this month presents a genuinely close question. I won’t speculate on what the Court will hold, but the administration’s arguments have merit. And even beyond the text of the law, its history, and whether the power to “regulate” foreign trade includes the power to broadly impose tariffs in exigent circumstances—all of which will determine the outcome at the Supreme Court—the tension at issue here is actually more fundamental. As clearly as the Constitution delegates to Congress the power to regulate commerce and impose duties, the Executive Branch likewise enjoys broad Constitutional authority to manage foreign affairs. Tariffs, particularly under the current administration, obviously implicate both foreign affairs and commerce.

    How Trump Has Used Tariffs 

    Trump is such a radioactive figure that it’s difficult to analyze anything that implicates him or his administration in any kind of dispassionate way. Nevertheless, I’ll try. 

    If the Liberation Day tariffs are understood strictly as an instrument to address the trade imbalances that President Trump cited as a national emergency (thus invoking IEEPA), there are a variety of valid objections to the plan. The claimed “emergency” is a trade deficit that has been the American status quo for multiple decades. Moreover, the claimed solution to that emergency has seen the trade deficit widen, not narrow, since tariffs were imposed in April. Finally, if the broader goal is to reindustrialize in America, then to that end, too, tariffs may be counter-productive in the short and medium term, as they’ll impose higher costs on wide swaths of American industry still reliant on inputs from all over the world (and particularly China). 

    Tariffs, however, are a good litmus test for who’s paying attention to what the Trump Administration is doing, as opposed to what they’re saying. To wit: On the other hand, a Washington Post report in early August cited leaked State Department documents indicating that “[a]dministration officials saw trade talks as an opportunity to achieve objectives that went far beyond Trump’s oft-stated goal of reducing the chronic U.S. trade deficit.” U.S. requests of trade partners included “requiring Israel to eliminate a Chinese company’s control of a key port and insisting that South Korea publicly support deploying U.S. troops to deter China as well as Seoul’s traditional rival, North Korea.” This is one of maybe a dozen such reports since April, all indicating that when the U.S. is talking to trade partners, the conversations are not limited to bilateral trade. 

    Another example was last week’s trade deal with Malaysia, which includes language clearly related to China:

    If the United States imposes a customs duty, quota, prohibition, fee, charge, or other import restriction on a good or service of a third country and considers that such measure is relevant to protecting the economic or national security of the United States, the United States intends to notify such measure to Malaysia for the purpose of economic and national security alignment. Upon receiving such notification from the United States, Malaysia shall adopt or maintain a measure with equivalent restrictive effect…

    That language is designed to prevent China from evading high U.S. tariffs by rerouting goods through Malaysia, or even setting up factories in Malaysia. The Trump Administration is finalizing with several other countries in Southeast Asia that contain similar language, each of which was negotiated using access to the American consumer as leverage for the U.S. side. The Administration has not yet clarified specific elements of its transshipment policies or how these clauses will be enforced, but the framework has been put in place with almost every trade partner in Asia. 

    All of this begs an obvious follow-up: is the “national emergency” giving rise to these tariffs actually an escalating cold war with China? And rather than merely an instrument to correct global trade imbalances, are tariffs also being used as a tool to coerce more substantive cooperation from American allies in a bid to weaken China’s export-driven system and erect trade barriers to protect North American supply chains? If those questions are answered in the affirmative, it complicates any resounding rejection of the tariffs, in large part because the strategy appears to be working. 

    The point here is not that Trump definitely has legal authority to impose these tariffs or that any of these tariffs will help the United States re-industrialize. Rather, the past six months have shown that what was widely derided in April as suboptimal trade policy has nevertheless proven to be effective statecraft. Bilateral relationships in Europe and Asia that were on life support after Liberation Day have substantially improved since, and the U.S. has used the leverage of high tariff threats to sign favorable trade deals with almost every major ally it has, generating meaningful revenue for the American government and substantially reducing tariffs on allies in exchange for promised cooperation on a variety of geopolitical fronts. (Speaking of effective statecraft: if cold war thinking is a big part of the administration’s calculus in deploying its trade policies, it would be counterproductive to publicly announce that to the world, and particularly China, for obvious reasons.)

    Considering the Alternative

    After Wednesday’s hearing, I found myself thinking about Europe. Forgive the long excerpt, but here is Noah Barkin from the German Marshall Fund, writing his excellent Watching China in Europe Newsletter: 

    One year ago, EU member states agreed to impose tariffs on electric vehicle (EV) imports from China in a landmark trade case that was hailed (including on these pages) as a victory for the bloc and its efforts to shield the European car industry from unfair Chinese competition. But only 12 months later, the anti-subsidy case has come to be seen in Brussels and other capitals as a cautionary tale rather than a triumph of European trade policy. The EV saga dragged on for a full year, left the EU divided, and ended up penalizing European carmakers as much as it did their Chinese competitors. The tariffs that the Commission imposed are unlikely to prevent Chinese EV producers such as BYD from profitably exporting cars to the EU. Despite that, they triggered a robust response from Beijing, which launched a series of retaliatory trade cases targeting European cognac, pork, and dairy.

    Had the European Commission’s EV case collapsed in the face of pressure from Beijing and Berlin, the damage would have been far worse. Still, it is hard to argue today that the benefits from this hard-fought case have outweighed the costs. Instead, the saga exposed the flaws in Europe’s approach to trade defense. In a world where China and the United States are moving fast and hitting hard, the EU has been too slow, too timid, and too wedded to a rulebook the others have torn up. “We have developed a lot of instruments that are very narrow, very technical and that take a long time to deploy,” a senior European diplomat told me. “Going forward, we will need to go much harder in Brussels.” The view is shared by people at the top of the Commission who worked on the EV case. “It has been a huge lesson for us,” a senior EU official said. “We have been operating within the rules, and it hasn’t made a dent. There is no benefit to our measured approach, to being a slightly kinder version of the United States.”

    This realization is dawning at a time when the alarm bells over Chinese overcapacities are reaching fever pitch. … The EU’s policy of de-risking, which dates to a March 2023 speech by European Commission President Ursula von der Leyen, has yielded few, if any, results. In terms of trade, the EU is more dependent on China now than it was when the speech was given two and a half years ago.

    China’s exports to the U.S. have declined for six straight months, and while China’s exports to the rest of the world have continued to rise, those exports are going to markets less lucrative than the United States. One such destination is Europe. Markets throughout the continent are inundated with Chinese exports that threaten domestic industries. It’s a problem that’s getting worse, not better, and one that coincides with a war in Ukraine that has been openly enabled by Chinese trade and Chinese military components. 

    The EU Commission, to its credit, wants to take actions to respond to these realities. There have been mooted tariffs on steel, and recent debates on tariffs to ensure the continued flow of rare earths. The problem the EU has is an obsession with process, and a process that requires wrangling 27 member states, all of whom have different relationships with China and different points of vulnerability animating their calculus in trade. That dynamic has netted out to lots of fiery rhetoric from EU politicians, and very little tangible action to alter the bilateral relationship with China. As Barkin notes above, it took the EU more than a year to impose modest, narrow and ineffective tariffs to address the excess capacity of state-subsidized Chinese automakers that present genuine security concerns and have ravaged the continent’s domestic players. (In the UK, meanwhile, despite years of espionage incidents and interference campaigns, the government recently withdrew a case against a parliament staffer charged with spying for China, because the Labour Party refused to proffer a Government witness who would deem China a national security threat.) 

    Lest any Americans feel superior reading about Europe’s flailing attempts at self-defense, consider a scenario in which the power to impose tariffs and regulate foreign commerce were reserved exclusively to Congress. In that reality, foreign countries and globalized companies would be gifted with far more surface area to lobby for watered down policies that never achieve their intended purposes. Taking any action at all would require building a filibuster-proof majority from a bloc of members from different parts of the country and with wildly divergent interests, all of whom are subject to regular elections and therefore sensitive to rising prices that may accompany any shift in trade policy that prioritizes long term strategic interests over short term consumer welfare.

    The EU’s current reality—lots of rhetoric, little action, slowly boiled alive while free market interests continually prevail over national interests and industrial capacity and security steadily erodes—is not that far off from America’s baseline for the past 20 years. Trump’s six-month IEEPA adventure has been a brief departure from that norm, and if the Supreme Court intervenes to restrain those efforts, the future becomes more uncertain.

    Executive Function

    For the past 25 years, the American government has seen the executive branch steadily expand its authority while Congress becomes more sclerotic with each passing term. I’ve always lamented this shift, for obvious reasons. The separation of powers is a generally useful check on reckless decision making, and if we’re sticking with the tariff example, Congressional action creates a far more predictable framework than Presidential whims. The certainty of fully ratified law that’s difficult to repeal is better for businesses and trade partners, and more likely to yield durable shifts. The same is true for any number of Executive Branch initiatives that can alter industries overnight, only to be reversed the moment a new party takes office. At some point, it would be nice to return to an era where America ends the cycle of legal whiplash the entire country experiences every four to eight years.  

    Anyone reckoning with this shift honestly, though, should also wonder whether Congress can still act quickly enough to address the problems that are arising all over the world. It was the Biden Administration, for example, that conducted a 301 investigation and imposed 100 percent tariffs on Chinese EVs. Trump’s first term imposed a wide variety of tariffs on China using that same authority, and Biden kept those tariffs in place. Elsewhere, the Biden Administration responded to the Ukraine War by imposing a raft of financial sanctions on Russia after its invasion of Ukraine. Two weeks ago, Trump escalated the U.S. response to the ongoing war by sanctioning Russia’s largest oil companies. 

    If the Supreme Court rules against Trump later this year, the Administration will have options to reinstate many of the policies that are scuttled. Section 122 of the 1974 Trade Act allows the administration to impose a 15 percent global tariff for 150 days, while the aforementioned Section 301 of that same law allows the president to conduct a months-long investigation through the USTR and issue broad tariffs in response to unfair trading practices. There is also Section 232 of the Trade Expansion Act of 1962, which allows the president to impose tariffs on national security grounds, in this case after conducting an investigation through the Commerce Department.

    Each of those laws vests the President with clear authority to impose tariffs that are likely to survive legal challenges. The downside for the Administration is that the 301 and 232 tariffs require a more cumbersome implementation process and afford less flexibility, whereas Trump’s negotiations with trade partners this year have been aided by the ease with which he could ratchet tariffs up or down depending on the cooperation of foreign counterparts. That would have been impossible if every Truth Social post required a months-long investigation or a vote in Congress.

    I’m not defending those Truth Social posts, by the way: the bombastic and campy way Trump conducts business alienates lots of reasonable people, and certainly contributes to the bipartisan loathing of his tariff policy. By now, however, critics need to admit that Trump has accomplished more than they expected while incurring less damage than they feared, even if the U.S.’s position relative to China may be relatively unchanged. Indeed, the entire tariff episode should be a clarifying window into American power and how it’s exercised in the modern era: which tools are most powerful, the extent of authority that Americans are vesting in a President with every election, and the areas in which deference to the separation of powers can look anachronistic. Are these changes healthy? And if not, what do the alternatives really look like?’

    Define a National Emergency

    It was only a few weeks ago that China threatened to institute an expansive export control regime surrounding rare earths, potentially shutting off the supply of critical industrial elements and related components to the U.S. and its allies. Trump addressed the Chinese rare earth measures immediately, and did so by threatening to impose an additional 100% tariff on Chinese goods coming to the U.S., a move that would have severely hamstrung China’s economy at an already-sensitive time. He made that threat on Truth Social, using authority he’s claimed under IEEPA, and last week China relented, deferring the implementation of their export control regime for one year. Critics this week, including Supreme Court Justices, are arguing Trump’s tariffs are illegal expansions of IEEPA powers, but can anyone argue that a Chinese ban on rare earth exports wouldn’t be a national emergency?

    IEEPA authorizes the President to “regulate” foreign exchange to “deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat.” Which is precisely what happened. It’s hard to imagine a clearer example of the concept that trade policy and economic security are now deeply intertwined with foreign affairs and national security—and this was an episode resolved literally last week.

    And, stepping back, to the extent that Trump’s policies are about simultaneously weakening a foreign adversary and reducing our dependence on that same country—which again, just last month threatened to take our industrial supply chain hostage—aren’t they clearly addressing not just a national security issue, but the national security issue? What does national security even mean if we can’t produce fighter jets, cars, or chips because an adversary said no? Or, faced with the general problems posed by Chinese trade practices, how effective would any American response be if the President did not have the power to impose trade policies of his own in negotiations with not only China, but potential transshipment hubs in Malaysia, Vietnam, Cambodia and Thailand?

    That rare earth sequence, to be clear, is not dispositive of the legal questions under consideration this month; nor is it a defense of every strategic decision that Trump has made in prosecuting his trade war over the past nine months. What the rare earths episode should do, though, is remind everyone that confining an analysis of Trump’s tariffs to macroeconomics or Constitutional Law 1 is probably too simplistic. In fact, the more I’ve read about tariffs and the reactions they inspire, I think the only takes on these questions that I find to be truly terrible are the ones expressed without any reservations or doubt. In the modern environment, that kind of confidence betrays a lack of diligence.

    Sharp Text is extension of the Stratechery Plus podcasts Sharp Tech, Greatest of All Talk, and Sharp China. We’ll publish once a week, on Fridays. To subscribe and receive weekly posts via email, click here.

  • Why Taylor Sheridan Is Worth a Billion Dollars

    Welcome back to Sharp Text. If you’re reading this via email, thank you for subscribing! For anyone reading on the web who would like to receive weekly posts, you can sign up here. 

    We’ll focus on the entertainment industry today, and a massive scoop from Matt Belloni and Puck that surfaced Sunday night: 

    For a couple months now, I’ve picked up chatter that Taylor Sheridan wasn’t happy with the new Paramount regime. TV’s top creator, the originator of Yellowstone and its successful spinoffs, and Landman, and Lioness, and a bunch more hit shows on Paramount+, was disappointed when most of the executives he worked with were either fired or marginalized after David Ellison bought the company in August. Some of Sheridan’s budgets have been questioned by incoming streaming chief Cindy Holland, according to sources. 

    Now comes the big news: Sheridan has decided to leave Paramount when his film and TV commitments are up. He just closed a massive deal with rival NBCUniversal. The nearly eight-year arrangement for film will begin in March. But it’s the five-year TV overall deal that is most lucrative, unique, and potentially game-changing in the streaming business. Sheridan’s current Paramount pact for TV services runs through 2028, after which he will begin writing and producing shows exclusively for Universal platforms, including Peacock and NBC.

    The Wall Street Journal followed on that news with more details, reporting that the five-year TV deal for Sheridan “could be worth as much as $1 billion, depending on the success of Sheridan’s projects.” Sheridan will be free to make movies for NBC Universal beginning next year; he’ll have to wait until 2029 before making any TV shows for Peacock and NBC. For Paramount+ and its new benefactor David Ellison, losing the most valuable creator in show business is a real setback to at least the optics of the revival that Ellison’s undertaken this year. 

    Beyond the intrigue of how that relationship broke bad and what that portends for Paramount, there’s also a more fundamental story: Taylor Sheridan, who’s never won an Emmy award for his TV work, is leaving a Paramount deal that reportedly paid him $200 million for an NBC deal that will double that salary, and could pay him as much as $1 billion. Many of you may be wondering: Who is this person? How did we get here? 

    As a fan of Sheridan’s work, I’d like to take this opportunity to provide answers. Sheridan’s rise is one of the craziest things to happen in Hollywood this century, and while we only briefly hit this story on Sharp Tech this week, I think his billion dollar market value is a tech story in one respect that’s obvious, and one that’s less so. But first, some backstory. 

    What Taylor Sheridan Brought to Paramount

    Sheridan’s story has become a myth unto itself over the past 15 years in Hollywood. James Hibberd at the Hollywood Reporter did a excellent job taking a comprehensive look at his rise in 2023, and last year Trung Phan built on that work with a fun profile of his own. In brief: Sheridan began his career as an actor and found limited success on the margins of Hollywood as a regular on Veronica Mars and Sons of Anarchy. That trajectory hit a point of diminishing returns as he turned 40, and a contract dispute with Sons of Anarchy led him to quit acting altogether. As Sheridan recalled an FX executive telling his agent, “He probably deserves to make more, but we’re not going to pay him more because — guess what — he’s not worth more. That’s what he’s worth. There’s 50 of him. He is 11 on the call sheet. That’s what [Sheridan] is, and that’s all he’s ever going to be.”

    So he became a writer. With a baby on the way, his wife maxed out her credit card to purchase Final Draft software, and in 2013 Sheridan sold the screenplay for Sicario, which would ultimately be released in 2015 and become one of the best movies of the decade. The following year, Sheridan was nominated for an academy award for his writing on Hell or High Water (2016), and he was officially a successful screenwriter. Then came TV, as he sold the development rights for Yellowstone to HBO; he got buy-in from then-programming president Michael Lombardo before the show was sidetracked in development hell over concerns about casting and the fit with HBO’s brand. Ultimately, when Lombardo left HBO, he gave Sheridan his script back to market (typically, when HBO purchases the right to develop a show they also retain rights to kill it if the show never makes it to air). Sheridan sold Yellowstone to Paramount shortly thereafter, and a few years later, it was the most popular cable TV show in America. 

    In the midst of that success—and this is where the legend becomes almost a cartoon—Sheridan was offered the chance to buy a $350 million ranch in North Texas. Having grown up in the area, where the 266,000 acre 6666 ranch is legendary, the opportunity was a dream come true. 

    Paramount had been selling Sheridan on an exclusive production deal in the wake of the Yellowstone success, and while Sheridan had been on the fence about working with one company, the chance to purchase one of the largest ranches in America—the same family-owned ranch that loomed over his childhood and served as inspiration for the Dutton family ranch in Yellowstone—made his decision easier. So, to finance the purchase of his new ranch, he agreed to the aforementioned $200 million deal with Paramount, which was launching a streaming service in 2021 and hoping to build it around a variety of Sheridan projects, including multiple Yellowstone spinoffs.

    Those spinoffs (1883, 1923) became hits in their own right, as did the other Sheridan shows produced as part of the deal (Tulsa King, Landman, Special Ops: Lioness, Lawmen: Bass Reeves, Mayor of Kingstown). It gave Paramount a steady stream of tentpole programming that acquired and retained customers for their fledgling streaming service, while Sheridan had complete creative control and liberal budgets to bring all these stories to life. Line items on those budgets included filming on the 6666 ranch that Sheridan now owns ($50,000 a week) and renting 6666 horses and cows to feature in his shows ($25 per cow), and yes, some of that spending was controversial. But in broad strokes, the deal with Paramount was a mutually beneficial arrangement that was working remarkably well. 

    Then Ellison took over and new, Ellison-appointed executives began asking questions about budgets and intruding on Sheridan’s zen, and he began to look elsewhere. According to the Journal’s reporting, after talks with NBC intensified, “Donna Langley, chairman of NBCUniversal Entertainment, made a pilgrimage to his ranch to help seal the deal.” I’m glad the ranch could remain central to the story.

    What Tech Did to Modern TV

    Understanding what makes Sheridan’s work valuable in the entertainment marketplace first requires an accounting of how that market has changed of late. 15 years ago, when Sheridan was still acting, the biggest studios and networks in America saw the threat of Netflix encroaching on their audience, and eventually, one by one, they decided that streaming was the future of television. Rather than working to protect the cable bundle and the linear TV model, these studios built streaming platforms to compete in Netflix’s world, put their best content on those platforms, sold subscriptions far below cost to encourage customers to sign up, and accelerated the erosion of the cable model that had worked quite well for about 40 years. NBCUniversal is a subsidiary of Comcast, quite literally a cable company, but their playbook was no different than anyone else’s, and NBC launched Peacock in August of 2020. 

    Peacock has been hemorrhaging money ever since. Like every other company that’s tried to compete with Netflix, NBC has found that acquiring Peacock customers has proven to be harder than expected, and retaining those customers with compelling content month after month is equally vexing. In that context, rather than spending hundreds of millions of dollars attempting to generate hits internally, it’s a reasonable bet that NBC will fare better spending hundreds of millions of dollars externalizing that challenge to a creator who’s demonstrated an ability to consistently attract an audience and generates enough of that content to keep that audience subscribed. 

    The breadth of Sheridan’s success really is mind boggling. What differentiates him from his prestige TV peers is not merely a lack of awards, but an ability to churn out high-quality programming at an astonishing pace. Consider that Apple had a big, Emmy-nominated hit with Severance in 2022, and the 10-episode second season of that show didn’t air until 2025. During that same period, from April 2022 to January 2025, Sheridan released 1) the final season of Yellowstone; 2) two seasons Mayor of Kingstown; 3) two seasons of Special Ops: Lioness; 4) two seasons of Tulsa King; 4) one season of Lawmen: Bass Reeves; and 5) two seasons of 1923. That’s a total of 93 episodes of television across six shows, over two-and-a-half years. All of those shows have a healthy audience, too, and while Apple is cagey about releasing any viewership numbers for its shows, it’s a safe bet that each Sheridan property has a bigger audience than Severance. Even Lawmen: Bass Reeves, a show I never watched and had frankly forgotten about, set records when it was released. 

    But the quantity of successful Sheridan shows is only half the story. The quality of Sheridan’s work, and why these shows tend to resonate, is more interesting to me. That’s a tech story, too, albeit one that’s rooted in more subjective analysis.

    The rise of streaming meant that in addition to their attempts to replicate the success of Netflix, every major studio in Hollywood was also trying to become HBO, generating hit original programming, usually 10-episode dramas, that would justify premium subscription prices. This led to wild spending sprees, big swings, a handful of big wins, and lots of forgettable content (most of which I’ve watched). The shifting priorities of Hollywood and resulting glut of bingeable shows has been well documented, but what’s less commonly accounted for is that this shift in programming priorities coincided with the rise of Twitter.

    And Twitter was bad for art. It was a place where media members would exchange takes and share their work and attempt to advance their careers, and this dynamic created echo chambers and groupthink in all kinds of areas, including television criticism. And because the success or failure of streaming shows often turned on critical reception amplifying a show’s signal in this crowded entertainment environment, the dynamics above often led to strange creative choices. For one, there was the phenomenon of self-serious, “good” TV shows that felt like they were written more for 25 year-old critics than the audience. Canonical examples would be HBO’s Barry or FX’s The Bear, of which Slate finally remarked in a gratifying takedown, “what’s so irksome about The Bear isn’t just its aimlessness. It’s the sleight of hand that tries to keep you from noticing said aimlessness.” There was also an uptick in didactic art that would distractingly launder progressive politics into stories at the expense of authenticity. For example, here’s a positive review of HBO’s The Pitt, which won “Best Drama series” at the Emmy’s this year: 

    The Pitt tackles nearly every political issue of the moment—COVID-19, racism, transphobia, sex trafficking, abortion, fatphobia, homelessness, white male rage, childhood sexual abuse, addiction, mass shootings, vaccine skepticism, the carceral state, the encroaching threat of (and spurious justification for) private equity’s takeover of underfunded public health infrastructure. In its checklist-style, homiletic approach to teachable moments, the show can feel almost parodic. One exchange, between Dr. Collins (Tracy Ifeachor) and Dr. McKay (Fiona Dourif), verges on the kind of dialogue you might expect from a corporate training video.

    Not all these shows are bad, but they can be frustrating in similar ways. And at a broader level, what we’ve seen is that the increased demand for high-end original programming coincided with a sort of creative convergence, all of which gave birth to a landscape characterized by familiar aesthetics, predictable lessons, and too much risk aversion to reckon with the complexity of the real world. It reminds me of a wonderfully cranky column from Janan Ganesh in the Financial Times over the summer, in which he labels the Prestige TV era “bullshit on stilts” and observes, “So little of this stuff ever sticks. It is beautifully lit ephemera, but it permeates everything.” 

    Enter Sheridan. As so much of TV began to feel the same, that created a lane for someone to emerge as unique and refreshing even as he executes a playbook that’s actually fairly traditional.

    What Makes Sheridan Shows Different

    I’ll speak for myself here. I mentioned at the beginning that I’m a Sheridan fan, and a friend this week called his shows “slop,” which led to me offering a surprisingly passionate defense of his work. And on one hand, sure. He’s made about 400 hours of television in five years; so many shows that I haven’t had time to watch all of them (apologies to Tulsa King, Bass Reeves and seasons 2 and 3 of Mayor of Kingstown). By any objective standard, Sheridan’s making middlebrow fare that takes conventional TV formulas and dramatic tensions (often old-fashioned protagonists chafing against modernity, occasionally unsanctioned black ops assassination missions in Lioness) and builds stories around characters and settings that are new to TV, with propulsive plots that keep people watching. There is also romance baked into each show, and all the characters are very attractive. For people who just want to watch a good TV drama without thinking too hard, Sheridan scratches that itch.

    But as someone who does think too hard, I think it would be a mistake to understand much of Sheridan’s work as Suits-on-a-ranch. He works with familiar formulas, but his shows are also full of raggedy plot threads that aren’t always resolved (what was Demi Moore’s character doing in Landman?), and weird digressions that don’t always pay off (Ali Larter taking senior citizens trip to the strip club in Landman). What feels especially distinct, to me, is a creator that doesn’t have any fear of trying something that doesn’t land. Or to put it differently: Taylor Sheridan is quite clearly not on Twitter.

    Alongside a generation of self-conscious creatives addled on 24 hour news and endless feedback loops among critics and peers, his work is both gripping and full of laughably bizarre choices (why was there a teen pregnancy subplot in Special Ops: Lioness?), settings that never appear in mainstream media (ranches in Montana, oil patches in Midland and Odessa, a prison in Detroit), and characters whose worldviews either sharply diverge from those of the New York Times opinion section, or, in some cases, are broadly written parodies of that same opinion section. And all of this is refreshing! It’s not weighed down by the conventions and neuroses of the modern era, and therefore it’s more creatively interesting than almost everything being pushed on every other streamer.

    Sheridan’s work is often described and derided as “right-coded,” but that’s mostly a descriptor applied by people who don’t watch any of these shows. Yes, as the Journal notes, “Sheridan’s shows about tough men contending with a changing world appeal to red-state audiences,” but they appeal to plenty of liberals just the same. In addition to hard boiled male leads and right-leaning characters who aren’t explicitly criticized as bad, Sheridan’s show about unsanctioned black ops assassination missions is fronted by two women (Nicole Kidman and Zoe Saldana) and depicts those missions with real moral ambiguity, while 1923 foregrounds a story about the abuse indigenous people suffered on the American frontier. Finally, not that this should count for anything in this stupid game of scorekeeping, but Sheridan has also faced criticism from fans on the right for Yellowstone plots that are “too woke.”

    What Sheridan is most dedicated to is writing characters that audiences aren’t seeing elsewhere—ranchers, oil men, special ops soldiers, frontier settlers and indigenous people from a hundred years ago—and treating them with dignity as he tells fun, dramatic stories. These are the qualities have made him the most successful creative in Hollywood, even as he writes from Texas, on one of the biggest cattle ranches in the world. If there’s a political valence to anything he’s doing, it’s evident in an absence of neuroticism in the way he writes and the volume of material he generates, and an earnestness in the stories he’s trying to tell. Sheridan feels an obligation to entertain in all his shows, he attempts to depict the world as it exists, and when it comes to the love stories and heartbreak in his work, he’s not afraid to get sentimental.

    In the Hollywood Reporter story from 2023, Sheridan recalled the lunch at which he and Yellowstone co-creator, John Linson, found out that HBO was passing on the show. “It just feels so Middle America,” an executive told them. “We’re HBO, we’re avant-garde, we’re trendsetters. This feels like a step backward.” As it turns out, though, going backward can be pretty lucrative.

    Sharp Text is extension of the Stratechery Plus podcasts Sharp Tech, Greatest of All Talk, and Sharp China. We’ll publish once a week, on Fridays. To subscribe and receive weekly posts via email, click here.

  • The NBA’s ESPN Problem Might Finally Be Over

    Welcome back to Sharp Text! Thank you to everyone who reached out after last week’s article; it’s great to be here and we’re going to have fun on this site. Before I get started, a few notes on the site itself:

    • I plan on publishing once a week, but am going to experiment with formats. Last week’s article on the trade war was a standalone piece, whereas this week I want to bounce around to a few different topics.
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    • Right now everything on Sharp Text is free, and likely will be for the foreseeable future; I see Sharp Text as my personal notes on topics we cover on Sharp Tech, Sharp China, and Greatest of All Talk, which are all available as part of the Stratechery Plus bundle. If you find what I write interesting, you’ll love these podcasts and should subscribe.

    Finally, please email me with questions or follow-up! I might address it here, or we might address it on one of the podcasts. Reader/listener emails are what make this all work.

    Alright, that’s enough housekeeping. Basketball is back this week, and that’s where we’ll focus today. 

    The NBA has New Broadcast Partners and It Feels Like a Miracle

    NBC had me at the player introductions. Or maybe even a few minutes before that, when they opened with an aerial shot of the OKC capitol building and Mike Tirico set the scene. There had been months of talk about the return of Roundball Rock, which was predictably great, but everything that came afterward caught me off guard. The in-arena intros saw Steven Adams greeted with cheers from Thunder fans who watched him in OKC for seven years (which reminded me why I love sports) and raucous boos for Kevin Durant (which also reminded me why I love sports, and made me twice as excited to watch the game). Tirico’s play-by-play brought gravitas that made the game feel bigger, Reggie Miller and Jamal Crawford were fun all night, and we got the first installment of a long-awaited Michael Jordan interview, which was four minutes long and mostly about why he agreed to do an interview, along with a memories of free throw he made at house he rented during the Ryder Cup (it was great!). And, of course, the game itself delivered on all counts—a double OT, one-point Thunder win. Altogether, I left the first night of the NBA season amazed at how much fun I had.

    Last week Ben Golliver and I opened Greatest of All Talk with a 30-minute discussion of the NBA’s new broadcast partners. If you missed the news, Amazon and NBC/Peacock will join the league (or re-join, in NBC’s case) for the next 11 years, as part of a $76 billion rights package that was finalized last year. ESPN will continue as a third broadcaster and will host the NBA Finals and Christmas Day Games. TNT is out, but the network’s very talented announcing diaspora has been spread between Amazon and NBC. TNT’s Inside the NBA, the greatest sports studio show of all time, has been licensed by ESPN and will continue its run over there (and was very good Wednesday and Thursday). Amazon will begin its NBA broadcasts Friday night and is set to host the NBA Cup.

    Golliver wrote about the new deals at the Washington Post, and noted that NBA Commissioner Adam Silver has worked with the league’s new partners and “expressed a desire for NBA programming to ‘educate and celebrate’ rather than spark angry debates or denigrate the modern game.” On Tuesday night and in the days since, a number of folks on Twitter credited the NBC success to exactly that sort of tone shift, taking veiled shots at the talking heads on ESPN and TNT. 

    The focus on the tone of the previous broadcasting era isn’t quite right, though, in part because the occasionally surly candor of Inside the NBA is wonderful, and most fans loved basketball on TNT. More importantly, focusing on the tone of coverage undersells the extent of the league’s ESPN problem and the years-long grind that was underlying some of this week’s euphoria. NBC’s broadcast delighted fans not only because their production choices were all pretty good, but also because ESPN’s coverage of the NBA has been so frustrating, in so many ways, for so many years. 

    For one thing, on a basic level, the presentation of ESPN’s broadcasts is just clumsier than what NBC debuted on Tuesday. ESPN productions rarely elevate the game with either storytelling or music, and while I’m not an expert in this area, the claims that NBC’s cameras are higher quality certainly match my eye test. ESPN’s announcing teams have never been great, either, but it’s been particularly rough the past few years. Meanwhile, the pregame and postgame studio show was a mess for 15 years as it cycled through multiple hosts and dozens of experts (and loaded every show with commercials). A 2021 solution saw the network lean on a producer of “First Take” for a new direction, and his big idea was to build the show around “bold opinions” from Mike Greenberg, Michael Wilbon, and Stephen A. Smith. The show has been through several more iterations since then; Inside The NBA’s licensing deal will hopefully mean the end of those experiments.

    When NBC aired the in-arena intros Tuesday night, it reminded me that ESPN abandoned that practice in 2014, only to be shamed into bringing it back halfway through last year’s Finals, because fans were loudly complaining about the state of the broadcasts. All of it has suboptimal for both basketball fans and the league itself, and it led us to a place where Game 1 of the NBA season on NBC felt like a bigger spectacle than Game 1 of the NBA Finals on ABC in June.

    But production quality was only one aspect of the problem. At the Finals two years ago, ESPN opened its Mavs-Celtics coverage with Adrian Wojnarowski on the pregame show promoting a story about the Lakers chasing UConn’s Danny Hurley to be their head coach. This was the biggest stage basketball has, and there was Woj, the most prominent NBA reporter at the network, trying to make people believe the Lakers weren’t hiring J.J. Redick, as had been reported for weeks, minutes before Redick broadcast the Finals for ESPN and ABC. No one believed the Hurley story, and why it was foisted on the masses is its own mystery, but more importantly, this was the league’s flagship broadcaster beginning its NBA Finals coverage with breathless reporting on who the eighth-seeded Lakers might hire as coach instead of promoting the most important product the NBA has. I remember it vividly because I felt like I was going insane watching it happen.

    This season, ESPN began the preseason with Shams Charania, the replacement as newsbreaker-in-chief after Woj retired, reporting that Giannis Antetokounmpo was interested in a trade to the Knicks. Nevermind that the Knicks had nothing to offer the Bucks, that Giannis has never confirmed any of this publicly, and that even according to Charania, these talks fizzled instantly. The story seemed to confirm earlier reports from Charania this summer that Giannis was considering requesting a trade, and because it was broadcast by a cable channel with endless hours of news windows to fill, “Giannis to the Knicks??” became a mainstream story that insulted everyone’s intelligence for about 96 hours. It created the impression that Giannis is unhappy, cast a pall over Bucks season before it even began, and to what end? Who was that story for? It would be one thing if an insider like Charania had a policy of reporting every phone call he heard about, but I’m confident he doesn’t, because it would cost him access to future transaction news, which he clearly prioritizes.

    In July, NBA free agency opened with Rich Paul, CEO of Klutch Sports, sending a note to Charania, telling the world that Klutch and its client LeBron James “consider the Lakers as a critical part of his career,” but “want to evaluate what’s best for LeBron at this stage in his life and career.” LeBron went silent for the ensuing four months, allowing Paul’s statement to speak for him. Then two weeks ago, when Charania broke the news that LeBron would miss the beginning of the season with a surprising case of sciatica, ESPN’s Dave McMenamin intoned: 

    “If, while he is out, they are struggling, that could lead to the next step we could see at some point this season… Remember when Shams was told by Rich Paul that they’d be watching every move because the priority at this stage is to win? If they’re not winning, maybe he’s going to have to go elsewhere.” 

    For anyone who’s unfamiliar with the NBA, let me decode what’s happening there: An aging LeBron wasn’t offered a contract extension by the Lakers. He then used a friendly reporter in Charania to telegraph his displeasure to the world. He is now sitting out with an injury and may demand a trade, as telegraphed by another friendly reporter in McMenamin. A trade demand would, of course, lead to a whole new cycle of cryptic reports from Charania and McMenamin. 

    I can’t emphasize enough how little I care about any of that, and I think most sports fans feel the same way. But those are the sorts of stories that have been consistently foregrounded in the modern NBA media environment. Meanwhile, as Golliver noted, “Game 1 of this year’s Finals on ABC drew 10.3 million viewers, down from 15.1 million viewers for the comparable game in 2019, the last year before the coronavirus pandemic, and 20.4 million viewers in 2017, which was the highest mark of the post-Jordan era.” The league’s $76 billion TV deal makes clear the decline is not catastrophic, but it’s nevertheless real, with this chart from Sports Media Watch as another data point: 

    People will give you all kinds of explanations for the NBA’s waning popularity, and most of them will be true to varying degrees. For example, the NBA first moved to cable in 2002, when Disney and ESPN tripled the rights fees that NBC had been paying, promised more windows for games and round-the-clock integration with ESPN shows, and a cable platform that could attract younger audiences. Today, however, almost no young people have cable, and while many have access to ESPN, that was less true of TNT, and many of the cable RSNs (which broadcast the majority of local games) are barely surviving and have smaller audiences than ever. So that’s one problem. The NBA’s regular season is also about 20 games too long, and fans correctly intuit that individual games are not that important, which teams themselves confirm by periodically resting stars. There’s another.

    With ten times more entertainment options than there were in 2002, it’s easier than ever to check out on the league, and not everyone makes it back. Meanwhile, the NBA has always been a superstar-driven league, and that same fractured media environment makes it much harder to cultivate the kinds of mainstream superstars that have traditionally carried the league and created new fans. All those headwinds matter, but in the course of sports media’s bi-annual conversations about declining NBA interest, I think ESPN’s role has been underappreciated.

    Mind you, I once worked for ESPN, and continue to respect and avidly consume lots of their NBA coverage (Brian Windhorst is the best NBA journalist alive), but it seems obvious that if mass appeal is the goal, then it’s a big problem if the league is relying on a flagship broadcaster that a) hasn’t been very good at broadcasting games, and b) often discusses the sport as if the games themselves aren’t enough to hold anyone’s attention.

    The latter problem is structural, and not entirely ESPN’s fault. Like the league itself, ESPN is trying to retain audience in an increasingly fractured media environment, only ESPN is also accounting for dozens of hours of weekly programming in addition to the games themselves. That means caustic MVP debates, bizarre legacy arguments, creating and responding to Twitter narratives, half-baked rumors, and an emphasis on breaking transaction news a few minutes before the teams themselves announce the news. As a basketball podcaster who records four hours of content every week, I identify with every ESPN impulse except the last one. If I were running the league, however, I might be pretty annoyed with a partner that habitually creates and amplifies stories that make the league’s biggest stars look annoying and the league’s news cycle look exhausting.

    The NBA’s new broadcast partners present no such concerns. That’s part of why this new era represents a healthier change than I realized when the deals were announced last year. NBC and Amazon should be an improvement over the recent past not because of kinder, gentler coverage, but because ultimately, they just want to broadcast the games. They will have better cameras, better announcers, and fewer astroturfed Lakers rumors or half-baked Giannis trades shoved into the pregame show, because there is no news business to sustain. That distinction is easy to overlook, but it may prove to be important.

    The NBA is exiting a decade in which many of its most powerful stakeholders were under the impression that unlocking the league’s full financial potential meant selling 365 days of basketball news. The next few years are an opportunity to return to merely selling basketball.

    How Will Peacock Pay for This?

    Speaking of the new broadcast environment, the Wall Street Journal poses a related question: NBCUniversal Made a $27 Billion Bet on the NBA. Will It Pay Off? From the story:

    Soon after NBCUniversal finalized a $27 billion rights deal with the NBA last year, executives met in Los Angeles to discuss their new prize. The deal was expected to bring in new audiences and help keep streaming subscribers and TV viewers happy, but was going to be a money loser in the near term, an executive told the group, according to people familiar with the gathering.

    […] In the early years of the deal, losses are projected to be between $500 million and $1.4 billion annually, people familiar with the matter said. … For the deal to be considered a success for NBCU, Peacock would need to see significant subscriber growth. The streaming service’s base of subscribers lags behind its rivals.

    I may cover streaming in more depth next week, but for now we can state the obvious: If NBC is hoping that new Peacock subscriptions will help fund its $27 billion NBA deal, that’s almost certainly going to lead to disappointment. The NBA’s audience skews younger, and one thing young people don’t like to do is pay for things they can find for free elsewhere. Any games that are paywalled on Peacock are likely to draw tiny audiences for exactly that reason. Amazon, with nearly 200 million Prime subscribers in the U.S. (compared to about 68 million cable subscribers) will be a far more interesting experiment for the NBA and its ability to reach new audiences on a streaming platform.

    Regardless, it’s hard for me to get too worked up over the risks NBC is assuming, because the economics of almost every investment, by every non-Netflix company, throughout the entire history of the streaming, have also been irrational and unlikely to pencil out. And good news for NBC executives: as of Sunday, I am now paying $16.99 as a Peacock Premium Plus subscriber. It’s a start!

    The Final Edition of Bet Your Mortgage Locks?

    Every year on Greatest of All Talk I choose five over/under bets as my “Bet Your Mortgage Locks,” with the important disclaimer that you should NOT bet your mortgage on any of these picks. Unfortunately, the gambling problems both inside the league and outside the league are getting so grim that I may have to rebrand this segment in the years to come.

    In any event, sportsbooks have closed their books for ’25-’26 win totals, so even if you wanted to bet your mortgage, you missed your chance! For posterity’s sake, then, and to celebrate the beginning of the NBA season, I’ll close by sharing the picks from Monday’s GOAT.

    Wolves — OVER 49.5. This is faith on prime Anthony Edwards, plain and simple. He’s 24 years old and easily the most magnetic young star the NBA has, but his charisma and highlights tend to obscure the two qualities I find the most encouraging. First, Ant has dramatically improved different aspects of his game (shooting, reading the floor, ball-handling) each season he’s been in the league. Dedication to craft and his ability to quickly incorporate new skills distinguishes him from a number of peers who are drafted high, get paid and seem to flatline. The other thing to highlight is his emotional intelligence, and how deftly he’s assumed the alpha role in Minnesota while keeping teammates invested and feeling empowered. In the past few years he’s been asked to contend with Karl-Anthony Towns, Ruby Gobert, and Julius Randle, which is like a doctorate level crash course in managing complicated personalities that have driven other teammates crazy. Ant, however, found a comfortable rhythm with each of them. Last year’s team struggled for the first 30 games of the season as the Randle transition was being managed, but they still won 49 games. This year, there’s more continuity and 50 wins is very doable. 

    Bucks — OVER 43.5. Equally plain, equally simple, Giannis is too good to go 42-40 in the Eastern Conference. Also: I may regret creating a record of this, but I like the shape of this Bucks team more with Myles Turner than I did with the semi-washed version of Damian Lillard that Milwaukee had for the past two seasons. Lillard’s achilles injury aside, I’d rather have a stretch five and Cole Anthony/Ryan Rollins/Kevin Porter Jr. over another year of Giannis and Dame clumsily trying to make it work on offense while getting annihilated on the other end. The concern here was that Doc Rivers might have been wedded to last year’s doomed attempt to start Kyle Kuzma at the 3, but preseason games saw AJ Green (underrated!) starting at the 3 with Kuzma coming off the bench. That’s all I needed to see!

    Rockets — OVER 52.5. Full disclosure: I initially had the Mavs here at 40.5, but the thought of investing emotionally in several months of D’Angelo Russell was too much for me to bear. So we’re looking elsewhere in Texas and I’m going over on the Rockets. For three weeks I’ve seen various NBA pundits take the under on this bet, and as a natural born contrarian, they finally pushed me too far. The defense will be top five in the league again, Kevin Durant will help them close games, Amen Thompson was great last year and should be even better, and Alperin Sengun is entering his prime as a first class offensive hub (or at least business class). Finally: I’m not giving up on Reed Sheppard, a player I desperately wanted the Wizards to draft at number two in 2024. I’m Team Sheppard, even after some extremely hairy moments on Tuesday night, and Team Ime Udoka, who is a complete maniac.

    Pacers — UNDER 36.5. I was willing talk myself into the Pacers without Tyrese Haliburton, because that’s how much residual affection I have for their playoff run last year. Unfortunately, this is last year’s Pacers without Haliburton AND Myles Turner, and with some combination of Jay Huff/Obi Toppin/Isaiah Jackson expected to provide solutions up front. Throw in a T.J. McConnell injury for the first month of the season, and I don’t see this ending well.

    Hornets — OVER 26.5. Charles Lee is a good coach. Brandon Miller should have the breakout season in year three that was derailed by injury in year two. Miles Bridges is very productive on the wing. Kalkbrenner and Knueppel have a chance to be plus-minus Batman and Robin for the rest of the decade. Colin Sexton is here, and in case you weren’t paying attention to Utah for the past two seasons, Colin Sexton is good! I’ve made it this far without mentioning LaMelo Ball, and yes, I do have serious concerns about putting any amount of faith in LaMelo Ball. On the other hand, scared money doesn’t make money. Hornets over, LaMelo over: Here’s to feeling alive in 2025.

    I look forward to revisiting those picks in six months when I’m 5-0. In the meantime, thanks for reading, and here is video of Michael Jordan hitting the high pressure free throw at his Ryder Cup rental house.

    Reminder: To subscribe for weekly emails, you can click here. To email me questions, corrections, or comments, you can reach me here.

  • Did Xi Jinping Just Have a Bad Moment? 

    It’s been one week since China put the entire world on notice and made clear that long-term reliance on Chinese rare earths is untenable. Short-term reliance is no sure thing, either, at least for the United States. Here’s the New York Times on that news, if you missed it last Thursday: 

    The Chinese government announced on Thursday that it was escalating its curbs on exports of rare earth metals, as Beijing claims broader jurisdiction over the global manufacture of semiconductors and other technology. The new rules, which are set to take effect Dec. 1, are the latest step by Beijing as it tightens the reins on rare earths to exploit China’s dominance in the sector. 

    The rare earth rules could scramble the supply chains of some of the world’s biggest companies, including Nvidia and Apple. Rare earths are essential for the production of many computer chips, which are used in everything from smartphones to artificial intelligence systems. Rare earths are also used to make the magnets that power the electric motors in drones, factory robots and offshore wind turbines, as well as the brakes, seats and other systems in cars.

    The rules issued on Thursday give broad authority to China’s Ministry of Commerce to restrict not just rare earth metals and magnets, but also the many devices like electric motors and computer chips that contain these materials.

    “China is playing hardball,” said Jimmy Goodrich, a senior fellow at the University of California Institute of Global Conflict and Cooperation. The move “could position Beijing to have complete control of the global A.I. and modern electronics supply chain,” he added.

    The measures from Beijing elicited multiple responses from President Trump on Friday, including threats of “a Tariff of 100% on China, over and above any Tariff that they are currently paying,” as well as “Export Controls on any and all critical software,” and potentially cancelling a meeting with Xi Jinping on the sidelines of the APEC summit later this month. 

    I’m more interested in what the President said Sunday afternoon. 18 hours earlier, in Beijing, the Ministry of Commerce had taken pains to emphasize “China’s export controls are not export bans” and promised to consider non-military license applications in a “prudential and moderate manner.” By Sunday in DC, then, Trump struck a different tone. “Don’t worry about China,” Trump wrote, “it will all be fine! Highly respected President Xi just had a bad moment. He doesn’t want Depression for his country, and neither do I. The U.S.A. wants to help China, not hurt it!!!”

    It should be noted that this isn’t the first time China has weaponized rare earths, having done so first in 2010 during a dispute with Japan, and then again in May and June by restricting exports to Western firms in the wake of Trump’s tariffs on China. The spring dispute was ultimately resolved after the U.S. responded with a series of countermeasures, including a ban on the export of chip design software to China, proposed export controls on airplane components, and threats to revoke the visas of Chinese students studying at U.S. universities—all measures that were withdrawn once China restarted the flow of critical minerals and permanent magnets to Western firms. 

    What’s different this time is the establishment of a broadened export control regime that covers an expanded list of rare earths and related exports, including manufacturing and refining equipment for countries looking to develop their own mining and processing capacities, and requires foreign manufacturers shipping anywhere in the world to first seek Chinese government approval if they are shipping products that contain rare earths mined or refined in China, or refined elsewhere using Chinese tools, and those rare earths make up 0.1 percent or more of the product’s value. The rules will add regulatory burdens to companies everywhere, not just in America. Companies seeking approval may also have to submit product designs to Chinese authorities, which would make this regime a sort of institutionalized tech transfer for any company that uses critical minerals in its products. Contrary to the insistence of Beijing partisans, if implemented as written, these policies would be broader in scope and more extreme than anything the United States has ever done in global trade. 

    So let’s go back to Trump and the line about Xi’s “bad moment.” To the extent Trump is implying that Xi Jinping lost his nerve and made a tactical error, is he right? 

    Expected Benefits and Measurable Reality

    The Wall Street Journal reported last week that in the course of trade negotiations, China’s negotiating team is pushing the American side for the “full removal of tariffs and export controls.” These rare earth rules were reportedly introduced in furtherance of that goal, with explicit approval by Xi Jinping. There are a few reasons I think this strategy is misguided. 

    First, it misreads the U.S. position in the trade war and its willingness to negotiate a settlement. “Beijing officials see Trump as eager to make a deal,” the Journal reported. I wouldn’t be so sure. The U.S. has been expressing urgent concerns about China’s trade practices since the beginning of Trump’s first administration, and the problem has been getting worse every year. China is in the grips of a deflationary cycle and exporting its excess capacity all over the world (except to the United States, in light of Trump’s tariffs). It’s now commonly understood that China’s trade practices have led to the deindustrialization of trade partners whose domestic industries are undercut on price, creating both job loss and long term strategic vulnerabilities. How China wound up going full speed ahead in this direction is its own story—state investment has been diverted to manufacturing sectors after a years-long property buildout that at one point used more cement across three years than America did in the entire 20th Century, which led to a real estate bust and an estimated 60 million empty apartments—but what’s germane for our purposes is that for Western economies, the status quo is intolerable. 

    China, meanwhile, is intractable. The government has not curbed exports of excess capacity and runs a trade surplus of around $1 trillion. If they were to meaningfully alter those dynamics tomorrow, even more factories would sit idle, more jobs would be lost, and social stability would be in jeopardy. In other words, China can commit to purchase goods from the U.S. to put a dent in the trade deficit, but I’m skeptical that its leaders are either willing or able to restructure the aspects of the economy that are actually driving tensions with the U.S. No amount of soybean or Boeing purchase commitments will allay fears of state-supported industries that are are eroding America’s ability to compete across a variety of sectors and creating strategic dependencies on an adversarial government that talks explicitly about “tighten(ing) the international industrial chain’s dependence on China.” It’s certainly possible that Trump is either naive or vain enough to seek a big number commitment and some kind of compromise that would allow the U.S. to continue doing business with China indefinitely, but this week’s rare earth sabre rattling is a vivid reminder of why that would be dangerous.

    And speaking of dangerous naivete, there is a fairly common perception that the Trump Administration has gone “soft on China,” and it appears to be a perception shared in Beijing. Rush Doshi, a former NSC member under President Biden, told the Wall Street Journal Wednesday, “It is precisely China’s belief that Trump will fold—as he appeared to do on [rare earth] magnets earlier this year—that has led them to massively escalate.”

    Did the Trump administration actually fold earlier this year? When China restricted rare exports in the spring, Trump issued and then rescinded new countermeasures on China—the airplane components, chip software, etc—but never rescinded any of the initial tariffs and did not roll back any export controls on advanced semiconductors or high bandwith memory as part of the eventual compromise. If China understood this as weakness, they are misreading an Administration that has spent the year negotiating lower tariff rates with every trade partner on earth, while leaving tariffs firmly in place with the biggest trade partner of all. The average U.S. tariff on Chinese goods is 57.6% as of Thursday, port fees targeting Chinese shipbuilding dominance were introduced this week despite months of Chinese objections, and the Commerce Department recently revised entity list rules to include thousands of Chinese subsidiaries and close longstanding export control loopholes. 

    None of this is to guarantee that Trump won’t fold exactly as the Chinese expect, but if Xi and his negotiating team pursued this strategy because they believe Trump has already folded over and over again, their read on this Administration is at odds with measurable reality. 

    What’s more, if Trump were to fully capitulate to Chinese demands and remove tariffs and export controls in exchange for guarantees of continued rare earth access, that’s a bell that probably can’t be unrung. Until America develops durable alternatives to the Chinese critical mineral supply chain, any China policy the Americans ever attempt to implement for the sake of economic or national security, if it’s a little bit too inconvenient for the Chinese, could trigger the same response from Chinese authorities who suddenly start vetoing rare earth export applications. So here, when you consider the implications of an American capitulation in light of China’s threats, the rare earth measures may have made it even harder for Trump to entertain a deal to de-escalate.

    America has cards of its own to play, as the world saw in the spring. The U.S. can ban the export of critical software to the PRC and, depending on the breadth of such a ban, handicap the progress of either the Chinese chip industry or larger swaths of the PRC economy. Restricting the export of airplane components (again) could impair China’s aviation industry, while sanctioning banks or taking steps to de-list PRC companies traded on American exchanges are additional countermeasures that have been explored previously and could easily be entertained again. The point here isn’t that these measures or others would lead to a detente and continued access to rare earths for American firms. I don’t know how China would respond to U.S. aggression. What’s clear based on the past nine months, though, is that an escalatory cycle is far more likely to materialize than any fantastical scenario in which Trump decides, for the sake of stock market stability, to roll back all tariffs on PRC goods, several years worth of export controls, and any ability to credibly deter Chinese behavior for the foreseeable future.  

    At a practical level, the analysis of this decision could end there. Trump is probably correct; Xi Jinping had a bad moment when he greenlit a policy that is unlikely to yield meaningful progress in the trade war and could instead lead to U.S. escalations that compound existing challenges facing China’s domestic economy. But that conclusion understates the risks for a country that is nowhere near as self-sufficient as the United States and still reliant on trade with the developed world to power its growth. 

    Underappreciated Risks and Protracted War

    On April 28th this year, with American tariffs on China at 145%, Beijing Daily published a piece exhorting citizens to revisit On Protracted War, a collection of speeches given by Mao Zedong in 1938. Tariffs have since been reduced from late-April levels, but the war continues, clearly, and to the extent these are the early innings of an inevitable decoupling between the US and China, that process is likely to take years. Under any protracted war scenario, then, controlling the narrative is crucial. And here is where it’s notable that Beijing’s rare earth rules could restrict the flow of critical minerals to companies all over the world. 

    To illustrate this point, we can go back to April. If Beijing wanted to scuttle America’s trade war, the time to deploy these extreme measures was in the immediate aftermath of Liberation Day, with rules more narrowly crafted and explicitly limited to America. In the frenzy of those first few weeks, with U.S. stocks volatile and the bond market overheating, China may well have been able to scare Trump away from ushering in a full scale depression and forced the US to abandon its most aggressive tariffs on China. The rest of the world, back then, may have seen China’s measures and blamed Trump for inflaming tensions to the point that China had no choice but to establish reciprocal policies on rare earths. (And yes, leadership did attempt a version of this gambit with their May and June rare earth restrictions, but even then, China inexplicably expanded those restrictions to Europe.)

    Unfortunately for Xi, it’s not April anymore. The U.S. has brokered trade deals with every major country but China, while U.S. trade partners in Europe are being inundated with Chinese exports and are now proposing tariffs on China-dominated industries that are effectively identical toTrump’s tariffs. It was in the middle of that environment, and with leaders from all over the world descending on Washington D.C. for IMF meetings this week, that China announced policies that threaten to make a huge portion of the global economy subject to an application process overseen by the Chinese Communist Party. 

    Trump seized on this messaging gift immediately. “There is no way that China should be allowed to hold the World ‘captive,’” the President wrote Friday morning, “but that seems to have been their plan for quite some time, starting with the “Magnets” and, other Elements that they have quietly amassed into somewhat of a Monopoly position, a rather sinister and hostile move, to say the least.” Later, he emphasized, “This affects ALL Countries, without exception, and was obviously a plan devised by them years ago. It is absolutely unheard of in International Trade, and a moral disgrace in dealing with other Nations.”

    Countries around the world may not trust President Trump, but between warming relations with the largest consumer market on earth and the simple reality that all these countries woke up last Thursday and learned that their most successful companies may have to submit semi-regular applications to the Chinese government to participate in international trade, this is an argument that’s hard for Xi to win. 

    In Washington, too, the difference between economic calamity because of tariffs and calamity because of China’s response is important to consider. Volatility in April was blamed entirely on Trump and considered by many to have been avoidable, but the economy has been more stable since. If that success is then interrupted by a foreign country’s deliberate attempt to sabotage American industry and the stock market, the pain would galvanize government, private industry, and American public opinion not against Trump, but against China. At a minimum, it would lead to decoupling efforts that are more urgent and comprehensive than ever before.

    The Next Month and Beyond

    Xi, in fairness, doesn’t have many good options. The U.S. status quo is hurting China and inflaming trade tensions elsewhere in the world, and all this is happening as the domestic real estate market (and primary source of household savings) continues its decade-long decline, consumer spending flatlines, and youth unemployment looms as a problem of unknown magnitude, because China stopped reporting the figures. The status quo is bearable, but decidedly suboptimal. I don’t know what will happen next, and you probably shouldn’t trust anyone who says they do. The word “Taiwan” has not been mentioned once in this article, and there are a dozen other variables and sources of volatility that could complicate the next several years of China’s relationship to the U.S. and the rest of the world. 

    For now, I’ll simply stress that as someone who’s been following the trade war all year, I’ve noticed that the Trump administration has been consistently underrated for its resolve and strategic thinking in this area, and Chinese leadership might be getting too much credit for their foresight and calculus. It’s popular to observe that the CCP is an authoritarian government whose leaders are not subject to semi-regular elections to maintain their grip on power, and therefore China has a higher pain tolerance than the U.S. in any trade war scenario. But higher pain tolerance does not mean the system is outright immune to pain, and just because the trade war is not immediately an existential problem does not mean it won’t eventually become one. 

    Be clear about what’s happening in 2025. China is fighting to maintain its standing in the global trading system despite allegations of human rights violations, expansionist military tactics, widespread political and industrial espionage, and trade practices that have eroded industrial capacity all over the world. That’s the context for last week’s escalation. Rather than weathering the storm from the U.S. and presenting itself as the reasonable party upholding the global trading system, Xi and the CCP may have just sharpened the world’s focus as to which country, specifically, has rendered that system unsustainable.