Happy Thursday, y’all, or to the small fraction of you in Davos right now, warm collaborative greetings as we collectively address shared challenges during these uncertain times.
For the rest of us, the annual World Economic Forum is being convened this week under the theme: “A Spirit of Dialogue.” Previous hits include "Collaboration for the Intelligent Age" (2025), "Cooperation in a Fragmented World" (2023), "Stakeholders for a Cohesive and Sustainable World" (2020), and — a personal favorite — "Mastering the Fourth Industrial Revolution" (2016).
The eagle-eyed observer might note that Davos themes sound like they’ve been written by ChatGPT since before ChatGPT even existed. But the soundbites from this year’s summit are, thankfully, less templated and a bit more out-of-distribution than usual:
Dario Amodei, CEO of Anthropic, likened exporting AI chips to China to "selling nuclear weapons to North Korea."
“We’re drunk on the growth, it’s awesome,” Salesforce boss Marc Benioff said of AI’s economic upside to date.
Mark Carney, Canada’s PM, urged fellow leaders to stop invoking the “rules-based international order” as though it still functions as advertised: “the old order is not coming back.”
To any readers on the ground: stay warm, embrace the widening Overton Window, and for the love of spirited dialogue, please tell us what's actually being said about Greenland in the hallways.
IN THIS WEEK’S EDITION:
🌊 Day Zero decisions: Iran, water, and the Southwest
⚡ The GW gap, and press releases vs. power
🪨 Tesla's Corpus Christi refinery
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A couple of months back, we internally flagged a Scientific American story with a most curious, attention-grabbing headline: ‘Iran’s Capital Is Moving.’ The ayatollahs claimed they had “no choice” but to relocate Tehran.
Why would a cash-strapped country with, shall we say, plenty of other problems on its hands even be thinking about such a massive (ballpark $100B+) endeavor?
Because it’s running out of water.
Tehran is sinking tens of centimeters annually and the capital faces a prospective “Day Zero” where reservoirs run dry and taps go empty. Iran’s 90M people are facing their worst drought in decades, with aquifers collapsing, the country’s central plateau growing ecologically unstable, rivers drying to dusty beds, and water-rationing mandates stretching across cities and provinces.
When your reservoirs run dry, apparently even the sky becomes an enemy combatant…
While it’d be a fool’s errand to try and pin the current uprising to any one variable — political dissatisfaction, economic despair, and regional instability are a powerful, volatile cocktail — we shouldn’t discount the water crisis as a contributor to the government’s crisis of illegitimacy.
Rather than address decades of dam over-engineering and extractive agricultural policies, the regime has done what regimes do: point fingers. Neighbors Turkey, the UAE, and Saudi Arabia stand accused of diverting rain clouds, while Israel and the U.S. have been blamed for manipulating the weather.
As the situation has worsened, Iran has throttled power generation — much of which remains tied to water-intensive infrastructure. Blackouts compound protests, the regime responds with bullets and batons, this brutality invites further protest, and so the negative feedback loop spins.
"There is nothing noble in shrinking before the storm."
In The End of Thirst Traps, we wrote about a different dry place facing a similar reckoning: the American Southwest. Good news on that front: California is completely drought-free for the first time in 25 years. But the nation’s largest reservoirs, Lake Mead and Powell, still sit far below capacity, and the Colorado River’s flow has dropped 20% since 2000. A wet winter buys time but doesn’t reconcile the structural deficit we laid out.
Iran’s crisis is its own, shaped by the regime’s mismanagement and political rot, but the underlying physics are universal. Water scarcity compounds: it strains grids, fallows farmland, erodes political legitimacy, and provokes zero-sum battles.
When you’re at the base of Mt. Maslow’s Hierarchy, you don’t wait for the upper levels to get their act together. Fortunately, the Southwest still has choices, and the capital and stability to act on them. As we see it, the American Southwest has two options: (A) to choose the harder path and build at the scale of the problem (our preference: a solar + storage + desalination megaproject), or (B) to retreat into further rationing. As we wrote early last year: scarcity, defeatism, and managed decline are a choice. Iran has run out of alternatives. The Southwest hasn’t — at least, not yet.
Datacenters, Détente, & Democracy: Last week, we wrote about Microsoft’s pledge to ‘pay their way’ on datacenters. This sparked some smart reader replies, and in the spirit of spirited dialogue 😉, there are two wider “gaps” we’ve been thinking about:
THE PAPER GAP: The “press release economy” is in a bull market, touting 100s of GWs “coming online” (e.g. planned capacity), while in practice, only ~25 GW exists today. This paper gap is to be expected — interconnect queues run 5-10 years in high-demand regions; transformers and switchgear are backordered; utilities can’t guarantee baseload power; and projects that clear those hurdles can still face permitting, zoning, and “local veto” challenges. (As a baseline, Meta’s former energy chief expects just ~10% of announced projects to reach operation.)
THE PRC GAP: China, by contrast, has built fewer datacenters than the U.S. so far. What it lacks in access to the spice (AI compute), it makes up for with every other ingredient (transformers, switchgear, etc). Critically, the country also has a massive lead in power: it generates 2x more electricity than the U.S. and is adding capacity 10x faster. This is theorized to be a differential advantage for China in the longer-term AI
racebuildout.
Yes, American hyperscalers have to jump through more hoops, and yes, there is a pacing autocratic challenger that is all too happy to plop down a multi-GW hyperscaler cluster wherever it may please. But dismissing local vetoes as NIMBYism is sort of a moot point…communities get a say, that’s the deal in democracies. How to honor that deal while closing the gaps is the trillion-dollar question.
Now feels like a good time for a temperature check…
Click below to cast your vote. And after you do so, you can write in with comments — which we will curate and feature in a future Per Aspera.
The American buildout*: where do you stand?
Last week Tesla brought online its Corpus Christi-area lithium refinery, the largest in the U.S. and the first in North America to convert spodumene ore into battery-grade lithium hydroxide at scale (a processing step that China still dominates with two-thirds global share).
This is a meaningful first step toward reducing dependence on imported refined lithium and a new chapter of vertical integration for the ‘carmaker.’ It’s also a warning shot: can standalone refiners survive without owning captive demand?
Allow us to explain:
Lithium prices have fallen ~80% since 2022, from ~$70,000-80,000 at the peak to ~$10,000/ton, as Chinese overcapacity has flooded the market.
Tesla runs ~140 GWh of cell capacity that its refinery can feed directly, letting it ride that volatility and arbitrage margin across the value chain: when hydroxide prices compress, cheaper inputs flow through to the battery business rather than crushing a standalone refining P&L.
Squeezed between Australian spodumene pricing on the input side and state-backed Chinese converters on the output side, merchant refiners such as Albemarle and Piedmont don’t have that luxury.
“The math doesn’t work today,” Albemarle CEO Kent Masters said of its planned up‑to‑100 ktpa Chester County refinery, now on hold.
Piedmont has likewise paused a 30 ktpa Tennessee project as economics deteriorated.
01 / Tesla | Corpus Christi (Robstown), TX / Refinery / ~40–50k tpa LCE | First US integrated lithium refinery |
02 / Livent | Bessemer City, NC / LiOH processing / ~15k tpa | Conversion only |
03 / Albemarle | Chester County, SC / Planned refinery / up to 100k tpa | On hold |
04 / Piedmont | Etowah, TN / Refinery / 30k tpa | Paused |
05 / Silver Peak | Silver Peak, NV / Brine mine / ~4–5k tpa | Only operating US lithium mine |
Upstream, the situation is just as tight. The U.S. has one producing lithium mine (Albemarle’s Silver Peak) while projects like Thacker Pass, Hell’s Kitchen, and Kings Mountain are still years out. This keeps even “domestic” refiners reliant on imported Australian feedstock, weakening the sovereignty argument that might justify premium pricing or subsidies.
The upshot: The standalone U.S. midstream business case looks fragile. It’s something of a sovereignty paradox: American lithium refining works, if you have a fortress balance sheet and captive demand (i.e., if you’re Tesla), yet a resilient electrification supply chain (batteries, EVs, grid storage) can’t rest on one company.
What could break the lithium logjam? Some combination of targeted incentives at the highest-leverage points in the value chain, extraction technology that changes the economics on domestic deposits, or offtake commitments from manufacturers who decide supply security is worth a premium. Might we see Pax Lithica, a lithium-focused little sibling of Pax Silica?
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