\n
\u201cThe Dutch, the Spanish, the Portuguese\u2014they sailed around the world with beautiful large ships, but they were wooden wind ships,\u201d said Tung, Notable Capital managing partner and early backer of companies like Airbnb, Coinbase, and Anthropic. \u201cThe British were the first to scale ships with the steam engine. Adopting steel technology and applying it to the steam engine\u2014that made the British Navy stronger than the rest of the world combined. Without that buildout\u2014steel ships, the steam engine\u2014we wouldn\u2019t even have the American concept of free trade.\u201d<\/p>\n
Tung loves history (as do I, which anyone subjected to whaling ventures-centric writing knows), and I came to him with something that had been irking me: I\u2019ve often heard VCs talk about AI as an \u201cIndustrial Revolution-level change,\u201d in a way I\u2019ve frequently found hand-wavey. My question to Tung: What if we took the historical analogue seriously? What does it mean to take that parallel to its full conclusion?\u00a0<\/p>\n
And so Tung started with ships, suggesting a throughline from Portuguese spice routes to Britain\u2019s steel ship global dominance (in 1890, 80% of the world\u2019s ships came from British shipyards). To Tung, this is his first mental model for the technological leap we\u2019re living through as our global infrastructure morphs to meet the age of AI. His case: There\u2019s perhaps too much focus on any one app or company, and that major technological change only creates geopolitical dominance if the infrastructure is there to back it up.<\/p>\n
\u201cWood ships don\u2019t last as well in the long run,\u201d said Tung. \u201cThe need for steel ships with steam engines was important to be able to go around the world. The British end up doing this because they invest in technology that allows them to leverage the benefits of the Industrial Revolution. They end up dominating the world for more than 100 years.\u201d<\/p>\n
I also asked Tung a question I\u2019ve been asking all sorts of people lately, my own strange version of a Rorschach test perhaps: Are data centers the railroads of the 21st century? His personal answer is, essentially, yes.<\/p>\n
\u201cIf you don\u2019t have enough compute to meet demand, it doesn\u2019t matter if you have a better model,\u201d Tung told Fortune<\/em>. \u201cThe models that win are the ones that are available.\u201d<\/p>\nConsider, for example, the Civil War, won partially because the railroad infrastructure of the North was far more developed than the South\u2019s. It wasn\u2019t just about having food or troops; it was about getting around.<\/p>\n
\u201cIt doesn\u2019t matter if you have the resources if you don\u2019t have the [means] to move them,\u201d said Tung. \u201cMost major Civil War battles happened within 24 miles of a railroad\u2026 If you don\u2019t have a railroad\u2014or compute\u2014it doesn\u2019t matter if you have better engineers, better politicians, or better thinkers.\u201d\u00a0<\/p>\n
This is, vitally, where geopolitical concerns enter the picture: China has been largely outbuilding the U.S. for decades.\u00a0<\/p>\n
\u201cOver the last almost 20 years, the [amount of] subway and high-speed rail built in China was unprecedented,\u201d said Tung, who\u2019s Taiwanese-American. \u201cNow, China has more high-speed rail than the rest of the world combined, kind of like the North in the Civil War. They executed very, very well. It\u2019s mind-boggling.\u201d<\/p>\n
This goes beyond modern railroads: Looking at ships, some stats suggest that over 80% of new shipbuilding orders worldwide go through China. For perspective: Each year, one state-owned Chinese conglomerate (the China State Shipbuilding Corporation) builds more commercial ships than the aggregate U.S. shipbuilding industry has built over the 81 years since World War II ended.\u00a0<\/p>\n
In short, China is uniquely adept at building, at a moment when that especially matters.\u00a0<\/p>\n
For the data center buildout, the picture\u2019s more layered: China currently controls about 24 gigawatts of working data center compute capacity, while the U.S. has at minimum 47 gigawatts by conservative estimates. However, the U.S. is staring down the challenge of executing a historic building boom. (A Columbia Business School professor has estimated that the AI infrastructure buildout could account for an average of 3.6% of U.S. GDP every year until 2032. This buildout, of course, comes with all kinds of concerns, from community pushback to questions about the electric grid\u2019s capacities.)<\/p>\n
Tung\u2019s case, ultimately, is this: The best ideas and talent don\u2019t count, not on their own. Amid a sweeping socioeconomic shift driven by technology, it\u2019s not invention that matters most. It\u2019s having the infrastructure to use the AI that you\u2019ve built, effectively and at scale.\u00a0<\/p>\n
\u201cWe\u2019re not going to just win,\u201d said Tung. \u201cWe have to work hard and make sure we win.\u201d<\/p>\n
See you tomorrow,<\/p>\n
Allie Garfinkle
X:<\/strong> @agarfinks
Email:<\/strong> alexandra.garfinkle@fortune.com<\/p>\nSubmit a deal for the Term Sheet newsletter here.<\/p>\n
Joey Abrams curated the deals section of today\u2019s newsletter<\/em>.<\/em><\/p>\nVENTURE CAPITAL<\/h3>\n
– <\/span>Scarlet<\/b>, a London, U.K.-based certification body for AI and software medical devices, raised $50 million in Series B funding. <\/span>Headline<\/b> led the round and was joined by <\/span>Notion<\/b> Capital<\/b> and existing investors.<\/span><\/p>\nPRIVATE EQUITY<\/h3>\n
– <\/span>Arrive<\/b>, backed by <\/span>Vitruvian<\/b> Partners<\/b>, Verdane, and <\/span>Searchlight Capital Partners<\/b>, acquired <\/span>Passport<\/b>, a Charlotte, N.C.-based parking compliance platform. Financial terms were not disclosed.<\/span><\/p>\n– <\/span>HR<\/b> Path<\/b>, backed by <\/span>Ardian<\/b>, acquired <\/span>SnapAI<\/b>, a Paris, France.-based AI and regulatory compliance company. Financial terms were not disclosed.<\/span><\/p>\n– <\/span>Rensa<\/b> Filtration<\/b>, backed by <\/span>AEA<\/b> Investors<\/b> and <\/span>British<\/b> Columbia<\/b> Investment<\/b> Management<\/b> Corporation<\/b>, acquired <\/span>Aero<\/b> Filter<\/b>, a Madison Heights, Mich.-based air filtration distribution and service company. Financial terms were not disclosed.<\/span><\/p>\nFUNDS + FUNDS OF FUNDS<\/h3>\n
– <\/span>Consonance<\/b> Capital<\/b> Partners<\/b>, a New York City-based private equity firm, raised $1.35 billion for their third fund focused on health care companies.<\/span><\/p>\nPEOPLE<\/h3>\n
– <\/span>Canyon Partners<\/b>, a Dallas, Texas-based alternative asset manager, hired <\/span>Chris<\/b> Hansen<\/b> as Partner and Chief Information Officer.<\/span><\/p>\n<\/div>\n#Steel #ships #railroads #data #centers #takes #Industrial #Revolution #analogy<\/p>\n","protected":false},"excerpt":{"rendered":"
\u201cThe Dutch, the Spanish, the P… <\/p>\n","protected":false},"author":1,"featured_media":6621,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[9730,1062,541,7716,1834,9729,9483,3166,3256,964,1835,889],"class_list":["post-6620","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance-news","tag-analogy","tag-centers","tag-data","tag-industrial","tag-private-equity","tag-railroads","tag-revolution","tag-ships","tag-steel","tag-takes","tag-term-sheet","tag-venture-capital"],"yoast_head":"\n
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<\/p>\n