The Underwritten Society: The Second Rotation

The Forest That Could Be Counted

In the late eighteenth century, the rulers of Prussia and Saxony had a problem. Their forests were a vital source of revenue, but they were impossible to manage. Old-growth woodland was a tangle of species, ages and undergrowth, full of things that couldn’t be counted, and didn’t show up in the treasury’s ledgers. So a new generation of scientific foresters set out to fix it.

They surveyed, measured and modelled. They devised tables estimating the timber yield of a standardised tree. Then they made the forest match the model. Underbrush was cleared, deadwood removed, and mixed woodland replaced with straight rows of a single fast-growing species, Norway spruce, planted at the same time and spaced for easy harvest. The new forests were orderly, legible and wonderfully productive. For decades, German forestry was the envy of the world, and its methods were exported across Europe and America.

Then, in the second rotation (the forester’s term for the next full cycle of planting and harvest), something went wrong. The monocultures began to fail. The deadwood and undergrowth that had been cleared away turned out to have fed the soil and sheltered the birds, insects and fungi that kept pests in check. Without them, the soil thinned, pests swept through the uniform rows, and storms flattened stands with no diversity to absorb the blow. Yields fell sharply. The Germans needed a new word for what they had created: Waldsterben, forest death.

The foresters were not fools or villains. Every decision they made was rational, measurable, and, for a long time, correct. Their mistake was to believe that the parts of the forest they could see and count were the forest in its entirety.

The Master and His Emissary

The psychiatrist Iain McGilchrist would recognise the pattern immediately. In The Master and His Emissary, he argues that the two hemispheres of the brain attend to the world in fundamentally different ways. The right hemisphere sees things in context, as part of a living, interconnected whole that can never be fully pinned down. The left narrows in on parts. It abstracts, categorises and manipulates, and it is superbly built for grasping and control. The left was meant to serve the right, the emissary carrying out the master’s intent. Unfortunately, over the past few decades, McGilchrist argues, the emissary has usurped the master. We have remade our institutions, economies and ways of thinking in the left hemisphere’s image, and like the foresters we have been rewarded for it, handsomely, for a very long time.

Many of our proudest achievements have followed the same arc. Social media promised to connect us and has left us lonelier and more divided than ever. Financial markets, built to allocate capital to its most productive use, have increasingly become an end in themselves, putting a price on everything while losing sight of what actually has value. Our food system has never produced more calories more cheaply, yet it has given us an epidemic of chronic disease. Each was a triumph of measurement and optimisation, and each, in time, began to degrade the very thing it was meant to serve.

AI is the purest expression of this shift yet: a left hemisphere without a body, without context, without a stake in the world it models. It is an extraordinarily powerful emissary with no master at all. If the Prussian forest is any guide, we are now entering the second rotation.

The Second Rotation in Markets

For forty years, finance ran its own version of the Prussian experiment. From the early 1980s to 2021, falling interest rates rewarded whatever could be abstracted, levered and scaled. Capital flowed to asset-light software, while established companies turned to financial engineering, using cheap debt to fund share buybacks. Supply chains were stripped down to just-in-time efficiency and sourced from wherever was cheapest.

Redundancy looked like waste, the economic equivalent of deadwood and undergrowth, so it was cleared away. Cutting spare capacity, offshoring manufacturing, running down inventory buffers, and underinvesting in infrastructure all made the numbers look better. The returns were spectacular. So, quietly, were the costs.

Those costs are now coming due across the world. We have entered an age of compounding crises. A shift towards a more volatile multipolar world, intensifying climate shocks, pandemics, and war. Public debt across major economies has climbed to levels where monetary policy can no longer be set in isolation from government financing needs, a condition economists call fiscal dominance. The cost of capital is resetting structurally higher. Pandemic shortages, energy shocks and war have exposed how brittle optimised supply chains were. In addition, the binding constraints on growth are no longer demand and distribution, but physical: power, materials, manufacturing capacity, and skilled labour.

In McGilchrist’s terms, the economy is being pulled back from the map to the territory. Value is shifting from paper claims on the real world to the real world itself.

The Underwritten Society

The foresters eventually learned that what had looked like waste was what held the forest up. Economies are relearning the same lesson. Governments, companies, and households will, explicitly or implicitly, stand behind the physical systems they depend on: power, materials, infrastructure, and the capacity to build. We call this the Underwritten Society. Where demand is structural and failure is politically intolerable. Four theses follow.

1. Baseload Energy

Electrification and domestic manufacturing all demand large amounts of uninterrupted power. Renewables will carry much of the buildout, but intermittency means the grid still needs firm power and far more transmission than exists today.

• Nuclear and uranium: The most scalable source of zero-carbon, high-density baseload power. Long-term utility contracting, small modular reactors and a structural deficit in primary uranium supply make this a generational theme.
• Natural gas and midstream: Gas is the bridge fuel and firming power for the grid. Pipelines and processing assets act as tollbooths, with high barriers to entry and direct inflation linkage.
• Grid hardening and transmission: High-voltage lines, transformers and switchgear are the real physical choke point of the energy transition.

2. Critical Minerals

A world building grids, generation, roads, and other infrastructure is fundamentally mineral-intensive.

• Copper and base metals: Electrification requires historic volumes of copper, yet new mines often take fifteen years or more to go from discovery to production. A decade of capital discipline among miners has left a structural supply gap.
• Rare earths and refining: Supply chains for processing remain highly concentrated. Domestic and allied refining capacity is now a matter of national security, not just economics.

3. Building Capacity

Moving from clicks back to bricks means backing the companies that physically build society.

• Civil engineering and EPC: Engineering, procurement and construction firms that deliver mega-projects in transport, water, power and specialised industrial facilities.
• Domestic manufacturing and automation: Reshoring cannot rely on cheap labour. It depends on industrial automation, robotics and precision manufacturing at home.

4. The Repricing of Capital

• Hard assets over paper duration: Companies with low debt, real asset backing, tangible cash flows and capital discipline should command structural premiums over long-duration, unprofitable growth.
• Private credit stress: Much of private credit grew up in a zero-rate world. Floating-rate burdens and payment-in-kind structures will be tested as refinancing walls arrive.
• Monetary hedges: Under fiscal dominance, governments have an incentive to inflate away the real value of their debt. Central banks, particularly outside the West, have been adding physical gold to their reserves at a historically strong pace. Precious metals, short-duration asset-backed debt and floating-rate instruments offer protection without duration risk.

The Oak and the Reed

In Aesop’s fable, a mighty oak mocks a reed for bowing to every breeze. Then a storm comes. The reed bends and survives. The oak, too proud to yield, is torn up by its roots.

Identifying the systems society will underwrite is necessary but not sufficient. Transitions are non-linear in both directions. Capex cycles overshoot, policy swings, and markets alternately ignore and overprice structural themes. Conviction without agility becomes rigidity. Agility without conviction becomes drift.

Our answer is to separate the horizon of our conviction from the posture of our positions. The roots are the secular thesis: deep conviction in the foundational systems society will depend on for decades. The reed is how we hold that thesis: sizing, entry points and instruments that stay fluid, bending with volatility rather than resisting it.

In practice, market dislocations in structurally sound businesses become opportunities to accumulate, not reasons to retreat. Euphoria becomes a signal for discipline. Operational rigour, from unit economics to technological moats to balance sheet durability, decides which businesses deserve our roots at all.

The Prussian foresters built for a world that held still. The oak made the same mistake. It did not fall for lack of strength. It fell because it mistook strength for immovability. The allocators who compound through the coming transition will be those who pair deep roots with the humility to bend.