"What Should We Do?"

Inquiring Minds Want to Know

A little over a month ago I floated the idea of revisiting the competitive advantage of nations. I posited that what we are seeing geopolitically is radically different from the past, and that Michael Porter’s framework from 1989 needs to be re-examined for today’s world. While Porter highlighted that a country’s business competitiveness depends on items including factor conditions, demand conditions, supporting industries, and firm strategy / structure, this is not specific enough to understand why some countries’ businesses have competitive advantage in today’s world, nor does it inform business and political leaders what they must do to be successful in the coming decades.

The Interconnected New Stack

Politicians and business leaders of today must look closely at 11 critical domains that are shaping the current competitive advantage of countries. We can group these components into four areas using a framework first introduced by my friend and colleague, Young Sohn. In a speech to European business leaders, Sohn highlighted “The Four I’s: Innovation, Ideas, Investment, and Independence,” and the role that each play in today’s world.

These four areas are a great way to group the components of the New Stack. We can visualize the New Stack as follows:

The New Competitive Stack of Countries

For Innovation, the four key drivers in today’s world are: AI, semiconductors, data centers, and autonomous systems. This last one encompasses both consumer capabilities in automobiles, as well as military applications such as we are seeing in the Ukraine and Iran wars.

The foundation for these Innovations is built upon the Ideas that enable them — cultures that encourage big swing entrepreneurship, laws and ecosystems that support and reward risk taking, and education systems that graduate a labor force capable of competing aggressively on the global stage. A deep and rich financial market is required not only to attract capital, but also to Invest into productive and innovative market segments. Independence is protected by controlling one’s energy supply, food security, manufacturing base, and military capabilities.

Interestingly, it isn’t just that these four areas and 11 components are critical, but they are inexorably intertwined. Innovation is enabled by Ideas and paid for by Investment. Financial returns are driven by disproportionate growth of companies. Stable and predictable laws and government behaviors attract labor and capital to ensure that those who participate as workers and investors are rewarded for the risks that each takes.

A country that has strength in these areas is more competitive than those that don’t and thus can be more Independent. Agency in several components reinforces strength in other areas. As mentioned earlier, a vibrant education system that attracts and graduates the best and brightest (such as the United States’ university system), combined with deep and rich financial markets leads to increased entrepreneurship and further economic growth.

A Small Peak Inside: Deep and Liquid Financial Markets

While unpacking each of these components will require more time and analysis (a hint for upcoming Substack posts), let’s take a first look at three data points in financial markets: the value of the world’s largest public companies, the size of corporate debt markets by country, and the amount of venture capital invested in a country/region. While these aren’t the only figures of merit for exploring the depth and strength of a country’s financial markets, they do give insight to one source of competitive advantage for nations: the ability to attract capital as size becomes increasingly important for areas such as technology development, energy independence, and defense.

(NB: This section is not intended to highlight that the United States is the only winner in this part of the New Stack, but simply to highlight a portion of one component.)

Let’s start first with the market capitalization of the world’s 25 largest companies:

Source: Visual Capitalist using data from CompaniesMarketCap

19 of the top 25 are from the United States. Four of the remaining six from outside the United States are from the semiconductor industry. Technology and Energy companies dominate — which are critical parts of the New Stack.

If we look at corporate debt markets as a source of investment capital, once again, the United States overwhelms the rest of the world. There have been multiple debt issuances in the United States of over $30 billion for companies ranging from Verizon in 2013, ABI in 2016, and Alphabet and Meta in 2026. The largest European debt offerings have been around €13-14 billion (~$14.5 billion) for Amazon, Roche and ABI. Great Britain, Japan and Canada’s largest debt offerings range from ~$1.5 billion to $5.5 billion. Even China’s largest corporate debt issuances have been in the range of $5.0 billion to $8.0 billion. The rest of the world lags in both debt market depth and liquidity.

While the recent explosion of debt raised by AI companies (Alphabet, Amazon, Meta, Microsoft, OpenAI, etc.) was estimated to be over $150 billion in 2025 and might rise to over $300 billion in 2026, most of this capital has come from the United States. Participation from Europe and the Middle East has been non-trivial but is substantially less than from United States’ capital sources.

In a different area of Investment, if venture capital is the engine for innovation and entrepreneurship in an economy, the global delineation is even more stark:

Source: CBInsights

The venture market in the United States in 2025 was over 6x larger than Asia and almost 5x larger than Europe. Whereas deeper analysis reveals that most of this money went into AI companies, and while there are risks of over-aggressive valuations in this segment (potentially leading to equity valuation bubbles and systemic financial risk from debt overhang for data centers), the trend is clear:

Source: CBInsights

Access to growth capital is an unfair competitive advantage in this part of the New Stack.

“What Should We Do?”

As I’ve started to introduce the idea of the New Stack to companies and people from around the world, I’ve been struck by two questions I repeatedly hear:

“What should my country do?”

“Is it too late for my country? Are we going to lose our sovereignty?”

I think those are the right questions to ask.

This year at the World Economic Forum, Canadian Prime Minister Mark Carney gave a speech that was widely discussed about what the “Middle Powers” need to do to deal with a rapidly changing world of superpower realpolitik. I certainly understand Carney’s sentiment — he was asking what steps his country can take to regain agency in a world where global superpowers have disproportionate control over their own and others’ destinies.

While I appreciate the emotions Carney tried to evoke by referring to Václav Havel’s essay on the "Power of the Powerless,” he ended his talk with a laundry list of things that he said that Canada would do going forward: Change Canada’s fiscal policies (cut taxes), invest in key areas such as energy, AI, and critical minerals, develop new trade agreements with other countries, make new defense arrangements, and build partnerships based on common values such as diversity, along with several other actions.

It sounds great. But can or will Canada really do all these things?

A friend of mine once stated regarding a company that was dealing with monumental disruption, “If your strategy is to do everything, you have no strategy at all.”

One must keep in mind that not all the countries and companies with whom one partners have the same objectives as yours. While Carney’s criticism of the current United States administration is understandable from a Canadian perspective, does he really think that China shares Canadian values on diversity and freedom? Or are his actions in making an agreement to import Chinese vehicles simply leverage to use against the United States?

To be a bit provocative, for the last 30 years China stole Western technology as a quid pro quo for giving access to their domestic market to non-Chinese companies and countries.

China dominates global manufacturing and is now flooding the world with inexpensive goods:

This strategy has been good for Chinese citizens, but it is hollowing out entire industries elsewhere. The United States lost much of its manufacturing base over the last 40 years, and Europe (Germany in particular) is now facing a similar reckoning.

Through their growth over this period, China became a global economic and military superpower and took 750 million Chinese citizens out of poverty.

This wasn’t a bad strategy from a Chinese point of view.

It is frankly naive for Carney or others to talk about higher moral values as compared to coercion when one doesn’t discuss what strategies and goals that others are optimizing. Different countries are acting in ways that they believe are in their own interests. While I appreciate Carney’s admonition to see the world “as it is,” this can only be done if it is informed by understanding the reality of the actions and behaviors of other nations. Only if there is an honest acknowledgement of the reasons that explain the actions others are taking can one develop a viable strategy for one’s own nation.

I argue that countries and business leaders need to figure out what parts of the New Stack where they have control, the parts where they don’t, and how they will partner in those areas that are critical to regain agency of their destiny with partners who are not actively working against them. Countries will need to collaborate with others who can be counted upon — perhaps not in every way, but in ways that minimize surrendering agency.

The decisions that political and business leaders take now will greatly impact the standards of living for their nation’s citizens and their countries’ economic well-being for years to come.

There is no uniform solution and strategy for an amorphous set of “Middle Powers.” Each nation must be analytical and pragmatic about its choices, and the actions (and reactions) caused by the choices they make. What Canada needs to do is different than what Sweden needs to do which is different than what Morocco needs to do which is different than what Singapore needs to do.

The opportunities and challenges have never been greater.

The stakes have also never been higher.