The great commodities disruption

If I told you that the price of copper in Santiago, diesel in Milan, and wheat in Egypt can change overnight due to a decision made in Washington, you would probably think that the era of globalization has made everything too fragile. In reality, the true game changer is that our dependence on raw materials has never been so underestimated: we believe we live in a digital world, but all it takes is an attack on an oil pipeline or a crisis between Iran and the United States to shatter all the certainties on which the global economy is built. The common belief is that the economy is now made up of software, artificial intelligence, and financial services. But every time a crisis hits one of the major commodity routes, we are reminded that bits only flow if there is lithium, copper, oil, wheat, and gas. And that the real “disruption” is not that caused by startups, but the kind that occurs when a ship runs aground in the Suez Canal or a drone strikes a plant in Saudi Arabia. Take, for example, Larry Summers, the former U.S. Treasury Secretary, who said during the 2020 oil crisis: “We’ve forgotten that the world still runs on energy and food.” A personal touch: Summers says that his day always starts with checking the prices of commodities, not the stock prices of big tech companies. And there is one staggering fact: during the crisis in Ukraine, the price of wheat soared by 50% in just a few weeks, throwing food supplies in the poorest countries into chaos. At the same time, the temporary closure of the Suez Canal due to a stranded ship brought 12% of global traffic to a standstill: millions of containers were held up, and companies around the world were forced to grapple with a sudden shortage of materials. A London-based trader reveals that, when there is tension in the Middle East, oil volatility can cause billions to be lost or gained overnight. Yet most managers at large tech companies don't pay attention to this data: they think it's enough to innovate on apps and algorithms, forgetting that without raw materials, everything comes to a standstill. Now, the perspective that is often overlooked is this: the countries that control key raw material hubs—such as China for rare-earth elements or Russia for gas—are building a silent but enormous power, which is not featured in the news about startups but is felt when the power goes out or the price of bread doubles. The bottom line: The true innovation of the 21st century will be managing the vulnerability of raw materials, not just inventing the next social network. If this story has made the light bulb go on for you, on Lara Notes you can click I'm In: it's your way of saying that this perspective—the vulnerability hidden behind every object you use—now concerns you. And if tomorrow you find yourself talking about this with a friend, on Lara Notes you can tag that person with Shared Offline: that way, that conversation will be preserved, just as the memory of a crisis that changed us will be preserved. This Note is based on an article in the Financial Times and saves you the precious minutes you would have spent reading the full article.